By Michael Jones

Feb 19 - (The Insurer) - Longstanding soft market conditions will continue in the airline insurance sector unless capacity withdraws, despite preliminary 2025 loss estimates already exceeding net annual premium levels, multiple senior aviation sources have told The Insurer.

Monday's Delta Air Lines crash is expected to add $100 million in liability claims to this year's loss bill, which is now likely to exceed the $1.6 billion received in annual premiums after several crashes so far in 2025.

Gallagher global aerospace executive Nigel Weyman told The Insurer that the market was in a “precarious” position but said he saw little sign of the withdrawals that many aviation sources have said are necessary for a change in market conditions.

“We do not think that these losses will affect negotiations. As they stand at the moment, there is a lot of surplus capacity," he said.

“There's no sign of anyone losing their nerve or appetite and pulling out. That's not happening. We remain with this comfort that there is more capacity than we need and we can deploy that in our negotiations.”

This view was echoed by Willis, which said in its Q1 airline insurance report that rate reductions would continue for at least the early part of 2025 unless there is a capacity squeeze.

However, any further loss activity is likely to compound the challenges facing the airline insurance market.

Marek Ambrozewski, United Insurance Brokers’ aviation managing director, said: “With expected claims exceeding the level of annual net premiums, the sector is once again under pressure to balance sustainability with the need for competitive pricing.”

Two broking market sources said they were encouraging clients, even those that renew late in the second quarter, to come to market early to take advantage of the current softening.

One senior aviation broking source said: “I am recommending we get on with the negotiations and get certainty, because the fickle finger of fate could strike again and change the playing field.”

Three aviation market sources said that the rising attritional claims burden may also exacerbate the precarious market conditions.

In its Q1 2025 airline insurance report, Willis said that attritional claims typically represent somewhere between half and two-thirds of annual global airline premium.

”There’s currently a widely shared concern among insurers that the rising costs of smaller or attritional claims, which are typically absorbed before an insurer’s reinsurance program responds, are eating away at margin and leaving little left to cover major loss events,” the report said.