Aviation reinsurance mid-year outlook: Continued holding pattern or recalibration?

Now more than halfway through 2025 and with renewal conversations beginning as conference season starts next month, the aviation reinsurance market is potentially about to enter a new phase. Following a relatively restrained 1.1 renewal season in 2025, reinsurers could now respond to a series of high-profile aviation losses and evolving dynamics that are expected to influence the outcome of the forthcoming renewals.

Paul Smith and Dominic Riley, Managing Directors in Howden Re’s Aviation & Space team, identify two key forces now reshaping aviation reinsurance sentiment: cumulative loss activity and increased retrocession sensitivity.

First-Half Events and Market Dynamics

H1 2025 brought two high-profile events. The American Airlines loss in January, the reserve of which remains under consideration but is anticipated to be significant, and the Air India incident in June which has reportedly recently been reserved in excess of $400m.

In addition to these two events, the Jeju Air crash of late 2024, the reported continued deterioration of other historical losses and the initial crystallization of losses emanating from Russia/Ukraine are now forming a composite view of loss activity that is influencing insurer and reinsurer pricing assumptions and could lead to a hardening market going into Q4.

Paul Smith, Managing Director, Howden Re Aviation & Space, commented: “These losses are expected to flow through quota share and XoL structures, with American Airlines possibly affecting upper XoL layers, and Air India impacting the first layers of many all-risk general and, potentially, hull war-specific programmes. While capacity for non-proportional major risk business remains abundant, ongoing attritional pressure combined with the cumulative scale of these events could directly influence how 2026 reinsurance programmes are structured and priced.”

Retrocession Activation

At 1.7, first tier excess of loss and retro pricing was generally flat. However, the American Airlines loss could prompt repricing across programmes, especially as reinsurers re-examine their exposures in light of historical loss development trends from years with lower retentions and attachment points

Due to the potential size of the American Airlines loss, retrocession structures, typically triggered at $400 million of original insured loss, are expected to come into sharper focus going forward. However, speculation around potential government contribution may lessen the potential impact on both price and level.

MGA Growth Continues to Reshape Market Dynamics

The continued rise of Managing General Agents (MGAs) in the insurance space remains one of the most notable trends in 2025. Their agility and ability to make quick underwriting decisions have positioned them as important partners in aviation risk, particularly where traditional insurers face slower governance processes.

“MGA-led platforms continue to expand their role in the aviation space,” said Smith. “They’re well-positioned to respond quickly in a market that increasingly demands speed, specialisation, and clear risk appetite.”

This dynamic is expected to influence the architecture of 1.1.2026 programmes, especially in lines where responsiveness can drive competitive advantage.

Outlook for H2

As the market digests first-half loss activity and monitors evolving retro dynamics, all signs point to a more cautious but deliberate reinsurance environment for 2026. While reinsurance capacity remains readily accessible, reinsurers may look to adjust their risk appetite, review retentions, and closely manage exposure in their treaty and retro accounts.

Pricing in upper XoL and retro layers is expected to firm, and cedants may look to rebalance quota share structures or modify programme design to reflect new loss assumptions.

“The full impact of the current set of circumstances will become evident by the turn of the year,” added Dominic Riley. “All eyes will be on the 4th quarter major risk airline renewal placements to see whether these factors lead to a sustained recalibration or a continued holding pattern”