African insurers urged to build reinsurance muscle
SAMANTHA MADE
African insurers have been urged to invest in regional reinsurance capacity, strengthen technical expertise in aviation underwriting, and engage in meaningful dialogue with global markets to ensure continued access and fair pricing.
This comes after the aviation industry entered a turbulent phase in 2025, marked by a sharp rise in catastrophic incidents involving advanced aircraft systems. From cyber-related failures to unexplained power losses, insurers are now facing a spectrum of risks beyond traditional models of pilot error and weather-related events.
AFC Insurance regional manager Paul Machaka said that beyond financial and operational ramifications, the insurance industry must not lose sight of the human cost.
“The tragic crash of Air India Flight 171 should serve as a sobering reminder of the importance of robust risk management, prompt and fair claims handling, and the ethical responsibility that underpins the insurance profession. The current rise in aviation losses is not a statistical anomaly; it is a structural warning. Insurers must move from traditional pricing models to comprehensive, scenario-based approaches that reflect today’s digital, global and interconnected risk landscape,” he said.
He said that the tragic crash of Air India Flight 171 has brought renewed scrutiny to the aviation insurance sector, particularly at a time when the frequency and severity of aviation incidents appear to be rising.
Machaka added that with 274 lives lost and an estimated insurance claim of USD 475 million, the case is already being termed one of India’s most expensive aviation disasters.
“The widely circulated USD 475 million figure remains speculative. Until the official investigation concludes and the cause of the crash is established, both hull and liability settlements remain uncertain. It is important to highlight that under the Montreal Convention (1999), the international treaty governing air carrier liability, compensation is based on a strict liability framework. Airlines are liable for up to 128,821 Special Drawing Rights (approximately USD 170,000 per passenger) on a no-fault basis. Higher compensation is only awarded if negligence is proven,” he said.
This structured liability system, while providing clarity, does not necessarily translate to immediate payouts.
“In fact, historical precedents such as the Malaysia Airlines MH370 case show that claims can take years to settle, especially where the cause of loss remains contested. In MH370, many victims’ families are still in litigation more than a decade later. Should similar legal uncertainties emerge in the Air India case, we may see a prolonged and fragmented claims process,” Machaka warned.
From an insurance operations standpoint, Machaka said it is worth noting that primary insurers in India retain minimal exposure — typically around 5–10% — while the bulk of the risk is passed on to international reinsurers based in London, Europe and Bermuda.
According to Machaka, this illustrates how interconnected and globally leveraged the aviation insurance market is.
“One catastrophic loss can trigger pricing pressure across markets and portfolios, regardless of geography. There is already speculation that this crash will lead to a ‘hardening’ of the aviation insurance market, meaning increased premiums and tighter underwriting terms, especially for wide-body aircraft like the Boeing 787,” he said.
However, he stated that industry experts caution that it is premature to predict how the aviation insurance market will respond, as outcomes will depend heavily on the investigation findings and broader market sentiment.
“Much depends on how the investigation unfolds and how the reinsurance market absorbs the loss,” Machaka said.
The aviation sector is already facing mounting challenges as insurers grapple with new, complex risks that have emerged with modern aircraft technology. Industry experts warn that cyber-attacks, electrical system failures, and software malfunctions are becoming more prevalent, raising difficult questions for insurers and regulators alike.
Machaka emphasised the need for African markets to be proactive in building resilience to these global shocks.
“Reliance on external reinsurers leaves African markets vulnerable to global price swings and limited access to cover when crisis strikes. It is imperative that we invest in building regional reinsurance capacity, develop our technical expertise, particularly in specialised areas like aviation underwriting, and engage constructively with global markets to ensure Africa’s voice is heard,” he said.
Aviation analysts say 2025 has so far recorded an alarming number of major aviation incidents globally, further fuelling concern in the insurance sector. A table showing flight incidents in 2025, with incident descriptions, highlights the severity and complexity of the challenges ahead.
As the global insurance industry braces for potential market hardening and increased claims disputes, the spotlight is firmly on insurers, regulators, and governments to respond with agility — not only to safeguard financial stability but to uphold their ethical responsibility to the travelling public.
