Aviation Insurance: Navigating Claims and Risks in 2025

Aviation Insurance in 2025: What Claims Taught Us About Risk, Resilience, and the Next Underwriting Cycle

If you underwrite, place, broker, or manage aviation risk, 2025 probably felt like two years packed into one. Not because the industry suddenly forgot how to fly safely, but because the risk environment kept shifting under everyone’s feet.

Operational tempo climbed as passenger and cargo demand continued its post pandemic normalization. At the same time, supply chain constraints and maintenance, repair, and overhaul capacity pressures kept aircraft on the ground longer and pushed costs upward. Add geopolitical volatility, sanctions friction, and a growing list of “small device, big loss” exposures, and you get a claims year that demanded both discipline and creativity.

The good news: commercial aviation’s core safety culture remains strong. The harder truth: loss drivers are evolving faster than many policy wordings and risk models.

“The Jeju Airlines loss, which occurred at the end of 2024, is expected to be accounted for in the 2025 insurance year due to fiscal reporting cut off dates.”
WTW

Why 2025 Felt Different Even When Safety Metrics Held Up

Aviation underwriting has always been about complex systems operating in complex environments. What changed in 2025 was the concentration of secondary risk factors that turn routine events into expensive claims.

Three forces showed up repeatedly:

1. Timing and accounting effects that moved late 2024 losses into 2025 reporting, reshaping how the year “looked” on paper. (WTW)

2. Geopolitical constraints that complicated not only operations, but also claim presentation, recovery strategy, and even which markets could participate. (WTW)

3. Inflation and litigation dynamics that continued to stretch severity, especially on liability tails and high profile events.

In practice, this meant many teams spent as much time navigating process and jurisdiction as they did investigating root cause.

The Claims Landscape: From Major Losses to “Everyday” Severity

Major incidents still define aviation insurance headlines, but 2025 reinforced something underwriters have been tracking for years: frequency is often less frightening than severity creep.

Jeju Air: A Reminder That Reporting Years and Event Years Don’t Match

One of the most discussed losses tied to the 2025 year was Jeju Air’s Flight 2216 accident in South Korea, even though the incident occurred in late 2024 and rolled into 2025 accounts due to reporting cutoffs. Public reporting cited liability cover up to $1 billion per accident under the relevant program period. (Insurance Business)

This is a classic example of why aviation portfolios can look “lumpy” by year, and why stakeholders should be careful when comparing calendar year narratives to insurance year outcomes.

“The policy cover includes liability insurance coverage of up to $1 billion per accident.”
Insurance Business (reporting on Jeju Air’s program)

Sanctions and the Claim That Might Not Behave Like a Claim

Another theme was the way sanctions and cross border restrictions interfered with normal claims mechanics. In WTW’s 2025 claims review, the Azerbaijan Airlines event was highlighted as the type of incident that, under different circumstances, could have landed in the year, but was unlikely to be presented to core London and European markets due to complications tied to sanctions and Russia related restrictions. (WTW)

For insurance practitioners, the takeaway is less about one airline and more about a structural underwriting question: when the insured event is clear but recovery pathways are not, how should wording, compliance planning, and claims protocols adapt?

“The Azerbaijan Airlines event would also potentially have been included in the 2025 year in other circumstances, but is unlikely to be presented as an insurance claim to core London and European insurers because of the complications … and the sanctions …”
WTW

Emerging Loss Drivers You Can’t Ignore

Lithium Ion Batteries: The “Small Spark, Big Bill” Exposure

Few topics united claims teams, cabin safety, and regulators like lithium ion battery incidents. A fire that destroyed an Air Busan aircraft in January 2025 was widely reported as likely linked to a faulty power bank, prompting airlines to tighten carriage and use rules. (ABC)

This matters for insurers because the exposure is not confined to hull damage. It touches passenger injury, emergency response costs, airport interruption, reputational harm, and potential subrogation pathways depending on product origin and evidence preservation.

A practical underwriting angle: these losses live at the intersection of passenger behavior, cabin enforcement, device quality variability, and crew training. It’s a systems problem, not just a prohibited item list.

What Underwriters and Risk Managers Should Be Stress Testing Now

Here’s one focused set of items that kept coming up across claims conversations in 2025:

• Cabin fire readiness tied to passenger devices: procedures, training cadence, and containment equipment, plus evidence preservation steps for potential recovery. (ABC)

• Sanctions aware claims playbooks: pre incident compliance checks, escalation paths, and clarity on what “claim presentation” means when markets or counterparties are restricted. (WTW)

• Maintenance and supply chain pressure indicators: how deferred maintenance risk, parts lead times, and MRO staffing constraints translate into measurable exposure, not just operational frustration.

• Inflation sensitivity: reserving assumptions that reflect both economic inflation and litigation driven severity trends.

A Simple View: How 2025’s Claims Drivers Stack Up

Where This Leaves the Market Heading Into the Next Cycle

Aviation is not becoming unsafe. It is becoming more interconnected, more compliance constrained, and more sensitive to small failures that cascade through tightly coupled operations.

For insurers, the winning play in 2026 planning is not simply charging more premium. It is underwriting the reality of modern aviation operations:

• claims that cross borders and compliance regimes,

• losses driven by passenger carried technology,

• and portfolios where calendar year headlines may not match insurance year outcomes.

The market has handled hard years before. What 2025 clarified is that the best outcomes come when underwriting, risk engineering, and claims strategy are designed together from day one.