Allianz lists insurance challenges of post-COVID aviation

International financial services expert Allianz has published a new report on the insurance challenges facing aviation as it recovers post-COVID

Titled ‘Aviation trends post-COVID‑19: Nine issues to watch as the industry prepares for takeoff’, Allianz’s report contextualises the devastating impact of the pandemic on the global sector.

For instance, in April 2020 (the height of the first major lockdown) approximately 66% of all commercial planes sat idle and there was a 90% year-on-year reduction in passenger traffic. 

Source: Allianz

Now, thanks to the success of international vaccination programmes, flights are beginning to recover some of their pre-pandemic momentum. However, Allianz urges carriers to exercise caution and careful consideration of the challenges that lie ahead:

“The grounding of worldwide fleets during the pandemic has represented an unprecedented event for the aviation industry,” said Dave Warfel, Regional Head of Aviation. 

“Challenges will no doubt emerge as the industry readies for takeoff again. Although it is hard to predict exactly what shape the aviation industry will return, one thing is for certain – it will have changed.”

Five insurance risks

Allianz’s report enumerates five factors that have the potential to cause insurance-related issues as flights begin operating again:

#1 Pilot “rustiness”: An understandable consequence of massively reduced flight requirements, many pilots may feel unpracticed (or “rusty”) at their job, particularly on smaller aircraft that are chartered to smaller or more obscure locations for sightseeing.

  • Solution: Airlines should invest in training programmes for pilots returning to service following an extended absence.

#2 Rising “air rage”: Research from the Federal Aviation Administration found that by June 2021 there had been 3,000 incidents of passenger disruption to a flight. In previous years, the industry would generally see around 150 such occurrences.

  • Solution: Allianz considers inflated passenger disruption as a consequence of COVID safety measures, i.e. wearing a mask. It’s possible that frequency will drop as restrictions change, but the insurer cautions airlines to avoid actions that could be interpreted as ‘discriminatory’. 

#3 Damaged fleets: Following a long period of inactivity, during which they have doubtlessly been exposed to various weather conditions, fleets of aircraft may not be service worthy.

  • Solution: Careful checking and maintenance of the craft are essential; the cost of a large insurance claim could dwarf the sum required for maintenance.

#4 Pilot shortage: Despite a year of reduced service the aviation industry is actually considerably understaffed, with an additional 250,000 needed over the next 10 years. Therefore, pilots being assigned to aircraft they’re not familiar with or simply overworked can cause significant insurance risk.

  • Solution: “[There] is a lot of industry expertise and resources available to assist airlines in building proper fatigue management systems,” said Warfel.

#5 Next-gen aircraft: The pandemic accelerated the decommissioning of older and larger aircraft as the industry shifts towards newer and smaller models. While these are safer and more efficient they are also more expensive to manufacture. 

  • Solution: Airlines must weigh the balance in order to prevent future claims costs being untenable. 

COVID-19 fails to inflame insurance risk

Notably, Allianz states that COVID-19 itself has actually caused very few insurance claims within aviation directly. Almost invariably it has been global socio-economic conditions in reaction to the pandemic that have damaged the industry’s profitability.

“As a result of the significant reduction in commercial airline travel during the pandemic we saw fewer attritional claims than we would during a typical year,” states Cristina Schoen, Global Head of Aviation Claims. 

“However, the insurance sector was not immune to larger losses during the course of the pandemic, with different regions seeing tragic accidents, emergency landings, and hull losses to name a few. As air travel begins to return to pre-pandemic levels we expect claims volume to rise accordingly.


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