Howden Re’s Aerospace Treaty team said the future direction of key risk market conditions following the January 1, 2026 renewal will likely depend on the final amount of losses incurred in 2025.
After a relatively modest period of major risk airline losses, the past year has seen a number of high-profile claims, including American Airlines’ losses in January, Air India’s losses in June and most recently UPS’s losses in November, all following the Jeju Air crash in late 2024.
As a result, there was a market tightening in key risk markets in the fourth quarter of 2025, Howden Re noted.
Dominic Riley, managing director of Howden Re Aviation & Space, commented: “While the ultimate costs of recent losses are still increasing, their cumulative impact has reshaped renewal dynamics heading into 2026, with selective increases in excess loss schemes and greater pressure on retrocession layers, while the quota share structure remains broadly stable.”
It added: “Looking forward, if material losses do not worsen further, market conditions are expected to remain stable and insurers and reinsurers will be cautious to continue on a gradually hardening trajectory rather than a wholesale reset of the market.”
Although excess capacity persisted in some regions, the cumulative impact of these events – combined with the worsening of claims in the previous year – was enough to push the economy to strengthen.
However, Howden Re noted that the “long development tail” of aviation liability and unresolved questions about government contributions in the US Airways settlement means the final cost in 2025 remains uncertain.
The broker said market conditions improved sufficiently in the fourth quarter of 2025 to maintain existing capacity levels, but not yet enough to attract significant new entrants.
The general aviation market, which covers a variety of risk types and geographical regions, has maintained a soft trend throughout 2025 after experiencing previous difficult market phases.
After the outbreak of the Russian-Ukrainian war, freight rates rose sharply and the independent hull war market weakened further.
Howden Re pointed out that last year’s High Court ruling in favor of lessors claiming under contingent war risk policies had resulted in some loss advice reaching a disproportionate number of the market.
While reinsurance brokers say the impact is manageable so far, the complexity of these claims means their ultimate impact on reinsurance capital remains an uncertainty in the 2026 treaty year.
It is against this background that reinsurance renewals run from the second half of 2025 until January 1, 2026. Specifically, excess loss plans experienced low-single-digit rate increases following significant potential losses in key risk markets, with changes based on changes in risk exposure.
Howden Re notes that rate hardening is more pronounced at the retrocession level than at level 1 non-proportional reinsurance.
However, the quota share arrangement largely retains existing capacity and commission levels. Reinsurers have shown reluctance to increase quota share support for major risk accounts, preferring to stick to their current commitments.
Riley said: “The aviation market is in a delicate balance heading into 2026, with recent significant risk losses restoring some degree of pricing discipline but not yet fundamentally changing capacity dynamics.
“In the absence of further escalation in losses, the year ahead is expected to be characterized by cautious stability as insurers and reinsurers prioritize measured strengthening, disciplined capital deployment and a continued focus on loss development over aggressive growth.”