The war in the Middle East has wrecked the aviation insurance sector’s hopes for a calmer period after a turbulent 2025.

International broker Gallagher has issued its latest update in the sector which found that clients need to be increasingly proactive if they want to better manage their coverage.

The report said overall, capacity levels in the airline insurance market have remained stable through Q1 2026, albeit individual coverage levels are trending differently, with some areas now facing restrictions.

With underwriters now exhibiting a cautious approach to their capital allocation, certain risks, such as those in perceived high-risk regions, are encountering greater renewal challenges and capacity constraints.

“As of this publication, most insurers appear to have reported favourable overall results; however, we’ve seen limited reference to aviation performance,” it continued. “Lloyd’s of London reported a strong 2025 full-year result; however, its marine, aviation and energy segment posted a combined ratio exceeding 100%, due to the ‘continued adverse development of Aviation War losses associated with the Russia-Ukraine conflict’.”

Gallagher added as they entered 2026, the Hull War insurance market remained soft, driven by abundant capacity and strong competition as underwriters vied for market share. Lead rate reductions of over 10% were readily available. From late February 2026, the situation took a significant turn as war erupted in the Middle East. For now, war risk cover remains available, but underwriters are confronting significant pressure from management directives to re-evaluate risks and tighten terms.

Peter Elson, CEO Aerospace and executive chairman Gallagher Specialty said: “Following a turbulent 2025, marked by costly industry  claims, legal battles and an ever-volatile geopolitical landscape,  stakeholders had hoped for a more stable and subdued 2026.

“However, as the first quarter of 2026 draws to a close,  the aviation insurance market finds itself in an all too familiar  position, grappling with a host of new challenges and  complexities. Positively, core pricing has generally remained  stable during the period reviewed, albeit treatment of individual  coverages is trending differently by sub-sector, with some  now encountering greater renewal challenges and capacity  constraints as underwriters exhibit a more disciplined and  cautious risk-based approach.”

He added: “The main uncertainty influencing the market as we move  through 2026 is the war in the Middle East. This development  has significant implications for the insurance market, having  magnified security risks across the region and beyond.

“How this conflict unfolds will heavily shape future market  conditions and dynamics. A conditional two-week ceasefire  has been reported so if this holds, and the conflict is promptly  resolved, then the impact for insurers should be manageable.

“Consequently, should things deteriorate and the situation  escalates into a prolonged period of instability, it could have  far-reaching consequences.

“At the time of writing no major aviation losses have been  reported. Nonetheless, loss notifications are beginning to  surface in other insurance lines, indicating substantial and  mounting claims. Rates have surged within those lines of  business, with underwriters confronting significant pressure  from management directives to re-evaluate risks and tighten  terms due to the escalating conflict.

“Aviation is not immune; underwriters are carefully evaluating increased risk by territory  to monitor their exposures and adjust to this fast-changing  risk environment. The situation remains fluid, while we wait  to see how discussions and actions pan out. During this time,  there remains a real threat that even minor developments  could trigger a shift in market confidence and have widespread  implications across all sectors of the aviation portfolio.”

Elson concluded: “For clients renewing at any time through the  remainder of 2026, a clear strategy and early engagement  with the market will be essential to securing optimal terms  and conditions. Market conditions can change rapidly,  and those who take a proactive approach will be better  positioned to avoid or navigate these shifts.”