Industry sources have told Reuters that they believe airlines could end up paying twice as much for the insurance they need to protect themselves against losses triggered by war as providers of coverage look to offset recent losses.
The recent conflict between military factions in Sudan earlier this year led to the destruction of aircraft, with Reuters sources suggesting that losses are estimated to be between $240 million and $300 million.
Highlighting just how impactful this is for the industry, the same sources told the publication that the losses experienced in Sudan represented the entire annual global premium in the aviation war insurance marketplace.
As a result, sources said that this is causing insurers to consider doubling premiums on these types of policies when airlines look to renew in the final quarter of the year.
Aviation insurers are already in a tough spot, as they face legal action for up to $10 billion in claims from the roughly 400 aircraft stranded in Russia after sanctions on the country following its ongoing invasion of Ukraine.
As noted by Reuters, a number of players have cut back on aviation war coverage to minimise future losses amid the conflict.
The issues and losses are also having an impact on the reinsurance space, highlighted by reinsurance broker Gallagher Re’s July renewal report, which shows that some types of aviation war reinsurance saw rates rise by up to 100%.
Experts have noted that it’s not possible for airlines to operate without war insurance, so it seems that airlines will have little choice but to pay the higher premiums, with the insurers themselves having to navigate elevated reinsurance costs for war coverage.
