Following the 1 January 2026 renewals, the future direction of major risk market conditions will likely be determined by the final amount of losses incurred in 2025, according to Howden Re’s Aviation & Space Treaty team.
After a period of relatively modest major risk airline losses, a number of high-profile claims occurred over the past year, including the American Airlines loss in January, Air India in June, and most recently UPS in November, all of which followed the Jeju Air crash in late 2024.
As a result, market tightening occurred across the major risk market in the fourth quarter of 2025, notes Howden Re.
“Although the ultimate costs of recent losses are still developing, their cumulative impact has reshaped renewal dynamics heading into 2026, with selective rate increases on excess of loss programmes and greater pressure in retrocession layers, while quota share structures remain broadly stable,” Dominic Riley, Managing Director, Howden Re Aviation & Space commented.
Adding: “Looking ahead, absent further material loss deterioration, market conditions are expected to remain steady, with insurers and reinsurers cautiously continuing along a gradual hardening trajectory rather than a full market reset.”
Despite continued overcapacity in some regions, the cumulative impact of these events – combined with the deterioration of prior-year-claims – was sufficient to drive firming.
However, Howden Re notes that the “long development tail” of aviation liability and unresolved questions regarding government contributions in the American Airlines settlement mean the ultimate cost of 2025 remains uncertain.
Market conditions improved sufficiently in the fourth quarter of 2025 to retain existing capacity levels but not enough, as yet, to attract a significant number of new entrants, says the broker.
The general aviation market, encompassing a wide variety of risk types and geographical areas, maintained its softening trend throughout 2025, following a previous hard market phase.
The standalone hull war market also saw further softening following sharp rate increases that followed the start of the Russia-Ukraine war.
Last year’s High Court ruling in favour of lessors claiming under contingent war-risk policies has led to several loss advices entering the non-proportional market, Howden Re noted.
While the reinsurance broker describes the impact so far as manageable, the complexity of these claims means their ultimate influence on reinsurance capital remains a wildcard for the 2026 treaty year.
It is against this backdrop that reinsurance renewals took place through the latter half of 2025 and into 1 January 2026. Specifically, after significant potential losses in the major risk market, excess of loss programs experienced low single-digit rate increases, which varied based on exposure shifts.
The hardening of rates was more noticeable in retrocession layers compared to first-tier non-proportional reinsurance, Howden Re noted.
Quota share arrangements, however, largely retained their existing capacity and commission levels. Reinsurers demonstrated an unwillingness to boost quota-share support for major risk accounts, preferring instead to uphold their current commitments.
Riley stated: “Entering 2026, the aviation market sits at a delicate equilibrium, with recent major risk losses having restored a degree of pricing discipline but not yet fundamentally altered capacity dynamics.
“In the absence of further loss escalation, the year ahead is expected to be characterised by cautious stability, as insurers and reinsurers prioritise measured hardening, disciplined deployment of capital and a continued focus on loss development rather than aggressive growth.”
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