Hana Kulhová, Head of Aviation at RENOMIA,
Industrial and societal developments are introducing new risks across all sectors of human activity – and aviation is, naturally, no exception. How does an experienced insurance broker with a global presence view this evolving landscape, and what challenges and opportunities do they identify?
INCOMPLETE SAFETY INFORMATION
One of the main challenges for insurers and insurance brokers is the inconsistency of safety information provided by companies in the aviation sector. The lack of standardised reporting formats can lead to difficulties in accurately assessing the risk profiles of our clients.
BARRIERS TO COMMUNICATION
Effective communication between aviation companies, insurers and insurance brokers is essential for accurate risk assessment and management and for achieving the best results for all parties. However, communication barriers can exist due to technical jargon, differing priorities and a lack of mutual understanding of each other’s operational challenges. Bridging these communication gaps is essential for fostering effective collaboration and enhancing risk mitigation.
QUALITY DATA ACCESS
Insurers and brokers rely heavily on data to assess risk and set premiums. However, the availability and quality of safety and operational data from aviation companies can vary significantly. Incomplete or poor-quality data can prevent insurers and brokers from accurately assessing risk and can lead to less favourable terms for insured parties.
ANALOGY IN APPROACHES BETWEEN AVIATION AND INSURANCE
Both aviation companies and insurers are focused on identifying and mitigating risks in order to safeguard operational safety and financial resilience. They rely heavily on data analytics and continuous improvement to enhance their risk management practices. In addition, both industries recognize the importance of a strong safety culture and the need for effective communication and information sharing.
DIFFERENCES IN APPROACHES BETWEEN AVIATION AND INSURANCE
While the aviation industry is primarily focused on operational safety and regulatory compliance, the insurance sector is more concerned with financial risks and loss prevention. Aviation risks are often categorized into catastrophic risk and loss risk, with catastrophic risks being less frequent but more severe. In contrast, loss risks are often perceived by insurers as more significant due to their higher frequency and the potential for cumulative impacts over time.
Potential Areas for Collaboration
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Safety Information Standardisation: standardisation of information exchanged between aviation and insurance companies.
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Joint Safety Initiatives: initiatives aimed at reducing losses due to employee attrition and strengthening the overall safety culture.
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Data Sharing Platforms: establishment of platforms for sharing safety data and best practices between both industries.
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Training and Workshops: organisation of joint training and workshops to deepen understanding and collaboration on risk management practices.
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Research and Development: collaborative investment in research and development to address emerging risks and developments.
Navigating the Skies of Emerging Risk: Cybersecurity and Supply Chain Pressures in Aviation Insurance
Modern technologies, particularly artificial intelligence (AI), are amplifying the complexity and impact of cyber threats. Ransomware attacks, data breaches and IT system outages represent the most pressing concerns. To maintain its relevance to the aviation industry, the commercial insurance market must respond to this rapidly evolving risk environment to prevent gaps in protection from widening.
On the subject of airlines, here are several examples of airline risks that have evolved over time and are now listed as major risks on most airlines’ risk maps:
CYBER
Today’s aviation industry is deeply dependent on digital infrastructure. With digitalization embedded in almost every operational layer – from avionics to reservation systems – a multitude of vulnerabilities are emerging. Technologies such as AI are significantly amplifying the impact and sophistication of cyber threats. Ransomware attacks, data breaches and IT outages are therefore now major concerns. Despite the growing threat landscape, cyber insurance in aviation remains underdeveloped. Coverage is often fragmented, with insufficiently defined policy wordings and inadequate limits. Airlines and brokers must continue collaborating closely with insurers to address these grey areas and ensure clarity in coverage. Insurers must intensify their efforts to work with the aviation industry to properly quantify cyber risks.
SUPPLY CHAINS AND GEOPOLITICAL RISK
The aftermath of the global pandemic continues to disrupt aviation supply chains – notably through limited availability of aircraft, spare parts, and maintenance, repair and overhaul (MRO) resources. To ensure adequate protection for the aviation sector, insurance offerings must evolve to encompass:
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Contingent business interruption
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Non-damage business interruption (NDBI) – i.e. coverage for financial losses arising from operational disruptions not involving physical damage (e.g. cyberattacks, supply chain failures, or regulatory actions).
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Political risk insurance, with broader scope and adaptability to modern geopolitical realities.
Aviation Insurance of Tomorrow: Towards Digitalisation, Dispute Efficiency and Resilience
DIGITALISATION
Another hot topic that is ranked highly on our wish list is process optimisation and technological advancement. Most aviation insurance renewals are still burdened by manual spreadsheets, static risk presentations and various feedback loops between insurance brokers and insurers. Premium calculations, policy wording, claims notifications and expert reports also suffer from a lack of standardisation and automation. This leads to delays, increased operational costs and avoidable disputes.
CLAIMS AND DISPUTE RESOLUTION
The claims process is one of the most important functions of an insurance company and one of the most important services provided by insurance brokers to their clients, but also one of the most frustrating: complex chains of responsibility, different jurisdictional laws, and varying expectations often lead to extended claims processing and duplicate reserving. Emerging technologies such as AI-powered loss estimation, predictive tools for early claim booking, and digital tools for prioritizing and tracking claims are beginning to address these challenges but are slow to resolve underlying data quality issues and compliance concerns. It seems clear that the level of automation for straightforward claims will be higher than for complex cases that require more specific technological support. It is likely that the human element in such complex cases will remain paramount to ensure that they are handled appropriately and in line with a client-centric approach.
WAR RISK AND WORDING CHALLENGES
Since war damage liability insurance is essential to the operation of an airline, this issue has come to the attention of many airline boards of directors because the automatic termination clause threatens the continuity of their business. Despite the considerable energy and resources invested by insurers and insurance brokers, it is difficult to understand why the market has not yet been able to agree on a revised wording standard.
Aerospace Manufacturers and Aviation Infrastructure: Insurance Impacts and Market Dynamics
Ground handling risks have attracted negative attention due to the high volume of losses, aircraft repair costs and significant personal injury claims in recent years. Airside incidents involving vehicles and personnel may affect any insured party operating ground vehicles on the apron, not solely ground handling staff. Nevertheless, insurers are currently cautious about deploying high capacity in this segment.
Maintenance, Repair and Overhaul (MRO) providers are also adopting a more cautious stance due to sustained loss activity within the sector. Even minor errors in aircraft or engine maintenance have become increasingly costly, necessitating a robust premium base for insurers to absorb and anticipate such exposures.
Component manufacturers are competitively priced due to their excellent claim ratios. Large aerospace manufacturers possess significant purchasing leverage owing to their aggregated premium volumes, although each entity is still underwritten based on its individual performance. There appears to be growing market competition in certain risk categories within this segment.
General Aviation: Emerging Technologies, Risk Evolution and External Pressures
TECHNOLOGY AND DEVELOPING RISK PROFILES
New aviation technologies in various general aviation applications are creating new risk profiles and opportunities. Modern avionics, automation, and advanced safety systems are reshaping traditional risk evaluation across all segments of general aviation.
Training operations benefit from advanced flight training facilities and modern aircraft with sophisticated safety systems.
Business aviation features high-specification avionics, structured maintenance schedules, and enhanced safety management systems.
Even traditional roles within general aviation are incorporating emerging technologies, altering both risk profiles and operational capabilities.
The range of operational tools available to the general aviation sector continues to expand. Although manned aircraft will remain essential, many operators are identifying, testing and actively deploying unmanned aerial systems (UAS) to mitigate human factor risks and improve cost efficiency.
THE IMPACT OF EXTERNAL FACTORS
Recent global events have highlighted how external factors differently affect various segments of general aviation. Geopolitical events, supply chain issues, accidents and weather-related losses affect segments differently depending on their operational characteristics and geographic exposure.
Prolonged supply chain disruptions and delays in new aircraft deliveries have sustained high market values for older aircraft, while rising repair costs have contributed to higher claim values in the event of an incident. This affects all segments, but each has a different impact depending on the typical value of the aircraft and operating profiles.
Non-operational losses caused by extreme weather events are becoming more frequent, while the issue of ground equipment congestion at busy general aviation (GA) hubs impacts operators differently depending on their operational protocols and geographic risk exposure.
Connecting Aviation and Insurance: Dynamics of a Global Risk Partnership
INSURANCE Market Size
The global aviation insurance market is a significant and key component of the broader insurance industry, with an annual value estimated at approximately USD 6 billion (as published by Flight Safety Foundation). The aviation insurance market encompasses a variety of insurance products, including hull insurance, liability insurance and war risk insurance, catering to a wide range of aviation industries, including commercial airlines, private jets, helicopters, airports and aerospace manufacturers.
Aviation insurance involves assessing a wide range of risks, from fuselage damage and liability claims to operational disruptions and geopolitical threats. Key factors influencing insurance decisions include:
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Industry-wide variables such as aircraft type and age
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Operator-specific factors such as claims history, pilot experience, maintenance procedures and operating environment
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Market-driven conditions such as capital availability, reinsurance costs and competition
NEW TRENDS AND CHALLENGES
The aviation insurance industry is facing several new trends and challenges, such as:
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Increased liability claims
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Lack of pilots
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Technological progress
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Climate Change
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Higher repair costs
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Environmental, social and governance (ESG) considerations
Approaches to Risk Management
AVIATION INDUSTRY
Risk management is a key aspect of both the aviation and insurance industries. Effective risk management ensures the safety and reliability of air operations, while providing financial stability and protection against unforeseen events.
The aviation industry emphasizes safety through comprehensive safety management systems (SMS). These systems are designed to identify, assess, and mitigate the risks associated with aviation operations following these key components:
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Safety culture
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Risk Assessment and Mitigation
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Data and Information Sharing
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Regulatory Compliance
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Continuous Improvement
INSURANCE RISK ASSESSMENT
Insurance companies assess and manage risk in order to provide financial protection against potential losses. Their risk management approach typically includes:
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Data Analysis
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Risk Evaluation
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Risk Mitigation
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Underwriting and Premium Setting
Drones and Insurance: A Technological Alliance Transforming Risk and Claims
Insurers and insurance brokers are increasingly deploying drones for both risk assessment and claims management, particularly in emergency or disaster scenarios.
Risk Assessment:
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Monitoring vulnerable areas
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Pre-loss property assessment
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Post-loss disaster surveys
Claims Management:
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Remote inspections
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Faster claims processing
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Reduced costs
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Reduced fraud
Drones are transforming the insurance sector by offering powerful tools for risk evaluation and claims handling, particularly in high-risk scenarios.
Closing
Would you like to be certain that all key risks to your business — whether in aviation or any other industrial sector — are properly addressed?
👉 The specialists at RENOMIA, in cooperation with our global partner Gallagher, are readily available to support you — including an initial, non-binding consultation.
BY: Hana Kulhová
Head of Aviation Department
RENOMIA, a. s.
Fotocredit: Věra Křeháčková
