Articles - Airline Insurance Claims Review 2025: The lessons learned

By Philip Clayton, Head of Claim Advocacy, Global Aviation & Space and Scott Lyrick, Director, Claims Management, Global Aviation & Space, WTW

There has been steady progress in reducing the frequency and the severity of events over the last few decades.  There is always risk in aviation; aircraft operate in an exceptionally demanding environment at the forefront of technological development, and aviation organizations can be drawn into geopolitical tensions.

Effective risk mitigation is extremely important for the aviation industry. When a major event occurs there is a meticulous process that analyses the causes and subsequently suggests or mandates safety measures to reduce the risk for the future. As a result, manufacturing, operational and procedural processes are constantly being enhanced to improve safety.

An overview of the high-profile incidents of 2025

The Jeju Airlines loss took place at the end of the 2024 calendar year, but because of reporting cut-off dates it will have been fiscally presented in the 2025 year of account for several insurers. Three days earlier, 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 surrounding the incident itself and the sanctions that have been placed on Russia and states that co-operate with it.

January saw both South Korea’s Air Busan and American Airlines suffer major incidents. In the case of the Air Busan, it appears that a passenger’s power bank failed and caused a fire that engulfed the aircraft. Power banks have been widely banned from aircraft holds since 2016, but the rules have subsequently been tightened to prohibit certain types of power bank from hand luggage as well.

Meanwhile, the American Airlines incident was the first major commercial passenger flight to be lost in the US since the Colgan Air incident in 2009 and the deadliest airline incident in the US since 2001. Aviation administrators are examining how to amend the busy flight paths around Washington DC to reduce the possibility of a similar incident occurring in the future.

In mid-February, a Delta Airlines flight arriving at Toronto Pearson International Airport appears to have damaged its landing gear which led to the aircraft overturning on the runway. While there were several injuries, all 80 people on board the flight survived.

The loss of an IBM Airlines cargo flight in May was a reminder of the risk of operating in politically charged areas. The flight was arriving at Nyala Airport, Sudan, when it is said to have been destroyed by one of the sides in the Sudanese civil war, which apparently suspected it of carrying supplies for an opponent. We discussed the insurance implications of hotspot flying in this article.

The circumstances surrounding the Air India loss in June continue to be analyzed, there was a runway overrun in Russia in October and two further cargo aircraft losses during the final quarter of the year.

The first of the cargo losses was suffered by an AirACT aircraft operating on behalf of Emirates SkyCargo and was the result of a runway excursion in Hong Kong. The second, in the US and involving a UPS aircraft, appears to have suffered an engine separation during take-off and has the potential to involve significant liability claims.

It is worth noting that while official data for 2025 has yet to be compiled, the peak in runway incursions witnessed particularly in North America in 2023 and 2024 does not appear to have continued in 2025, at least so far as major incidents are concerned

Economic health check

The airline sector has almost entirely recovered from the challenges created by COVID. Passenger numbers and cargo volumes enjoyed strong growth in 2024 and continued to rise throughout 2025 a trend that looks set to continue in 2026, particularly in Asia Pacific. Rising load factors and falling fuel prices have improved financial health in many cases, offsetting weaker yields and helping to bring debt under control.

There are still residual supply chain issues following on from the pandemic, however, including the long waiting list for new aircraft. There are several issues within this for the industry, but focusing purely on the claims perspective, the reality is that older aircraft tend to be more expensive to run and require more extensive maintenance, and should they be involved in an incident, they are more likely to be found to be beyond economical repair and declared a constructive total loss.

This is compounded by the skills shortage among maintenance, repair and overhaul (MRO) organizations and the longer lead times for obtaining spare parts. It should also be noted that while the falling cost of jet fuel in 2025 is a benefit for organizations across the industry the upside is somewhat negated by the supply bottleneck for delivery of newer, more fuel-efficient aircraft.

Staffing, the price and availability of spare parts, and the long waiting list for new aircraft combine to constrain growth and make the industry a challenging place to operate at every level. The recent spate of cyber-hacks and unexplained drone activity also add to the pressure, and wider economic and geopolitical issues continue to create headwinds for the aviation industry.

Rising claim settlements

This skills shortage is also one of many factors driving up the cost of claims, particularly smaller, attritional, claims. Take the example of an aircraft that clips a wing as it comes to rest at its arrival gate. The cost of materials and the complexity of repairs on a modern composite aircraft hull is significantly higher than it was a decade ago, there is a longer waiting list for spare parts and repairs and an airline also loses revenue from not having an aircraft in service.

Economic and social inflation have also driven up the cost of liability claims over the last few years. Where an aviation insurance claim is concerned, economic inflation is the same for most parts of the global economy, particularly over the last few years where the cost of virtually everything, from new clothes to medical bills, has risen. Social inflation, however, is the gap between economic inflation and the payouts awarded in the event of a claim.

According to 2024 analysis by Swiss Re which covered the entire U.S. economy, economic inflation was 3.7% annually between 2017 and 2022, but social inflation was 5.4% annually, with the gap fueled liability claims costs.

Exacerbating the issue is the complicated subject of psychological harm following an incident. Where claims used to be mostly comprised of a figure for compensation for physical injury sustained during an incident, psychological harm is somewhat more nebulous and certainly less clearly defined. This has made claims awards more difficult to estimate and, in some cases, complicated the settlement process.

Accurate figures specific to the aviation industry are hard to come by, but there appear to be rising numbers of claims over the last few years that have received so-called “nuclear judgements” where juries award payouts of more than US$10 million. These significant awards tend to set the bar for future claims discussions, which runs the risk of creating a social inflation spiral.

AI: Not necessarily a panacea…

There is an interesting dichotomy in the current challenges around staffing levels in the aviation sector. As a highly regulated industry that operates in a high-risk environment, impeccably trained staff and crew are fundamental to an aviation operation’s success. This can create difficulties in finding skilled staff to fill vacancies. This issue was exacerbated by COVID when many qualified team members chose early retirement or alternative career paths.

One of the enticing aspects of artificial intelligence (AI) is that it could go some way to reducing staffing shortages by highlighting new efficiencies and creating opportunities for the industry to do more with less. There are two challenges to using AI to deliver a leaner future, however.

Firstly, AI at this stage is likely to reduce administrative needs rather than operational staffing. While administrative staff need to be qualified for their roles, the real shortage for the aviation industry is for roles such as pilots, cabin crew and MRO specialists, roles that perform vital tasks and take a long time to train for. AI may be able to reduce some of the burden of these roles, but there are many responsibilities that simply can’t be taken by AI at this point.

Secondly, deploying AI means more reliance on IT, which in turn increases both the risk of cyber incursions and the time it takes to recover from a significant attack. As we saw several times during 2025, when a cyber-attack happens, airlines and airports are often forced to switch back to paper-based processes while they attempt to get their systems back online. If administrative staffing levels are cut back too far, this recovery process could be made more difficult. This could make disruptions longer with implications for both cyber and business interruption claims.

The main point to make, however, is that reliance on mobile phones shows no sign of slowing among passengers, so the process of digitization in the aviation industry is also set to continue, which makes deploying AI both more efficient and more cost effective. So long as everything keeps working.

The reality of flying

The aviation industry faced some challenging headlines during 2025, some of which failed to take into account that the sector has returned to, or even exceeded, pre-COVID levels of activity. The pandemic constrained aviation activity, creating a stark difference when you compare claims activity between 2025 and 2020, 2021, 2022 and 2023. As a result, while there were several headlines questioning industry safety, the reality is more reassuring.

Safety remains the aviation industry’s primary focus and several of the incidents in 2025 were contained thanks to robust safety systems and technology, and the actions of highly trained, skilled crews.

The aviation industry faces an increasingly complex array of risk, ranging from the issues you might expect for an aircraft right the way through to geopolitical turbulence, cyber-attacks and economic pressures. These are balanced by rigorous pilot, crew and staff training, constant enhancement of technology, strict standards and a commitment to learn every possible lesson from the incidents that do take place. The industry’s trajectory remains positive.