Commercial airlines are experiencing an uneven recovery out of the pandemic, and while the overall buying experience has been more positive at this year’s insurance renewals, negotiations with insurers have been variable.

Ongoing challenges such as the lag in business and international travel compared with U.S. leisure travel, the risk of a surge in COVID-19 infections, and recent hail losses to aircraft parked on the ground, have affected individual airlines differently, experts say.

The airline industry globally is still recovering from the huge drop in air travel after the pandemic hit last year, said Garrett Hanrahan, Dallas-based global head of aviation at Marsh LLC.

Through October, total airline seat capacity was down nearly 40% this year compared with 2019 and those rates fluctuate by region, Mr. Hanrahan said. “It’s all linked to COVID,” he said.

Not only are insurers dealing with the variability in airline loss experience, but also exposures, said Joe Trotti, partner-head of aviation and aerospace at McGill and Partners in New York.

Against the backdrop of rates being the highest they have been for some time and benign loss activity “it’s attracting capacity,” Mr. Trotti said.

“You’re starting to see easing in rates, particularly if you have (an airline) that has a good record and growth baked into the renewal,” he said.

However, insurers are looking at each risk on a case-by-case basis. “No doubt about it, they are still focused on profitability,” Mr. Trotti said.

Jeff Bruno, Morris Plains, New Jersey-based president and chief underwriting officer at insurer Global Aerospace Inc., described this year’s renewals as “a mixed bag.”

“Exposures vary widely from risk to risk, as do agreed minimum premiums, deposits, individual loss experience and audit experience from prior periods,” he said.

While most airlines in the U.S. seem to be trending rapidly toward 2019 passenger levels or higher, insurers remain concerned about hull claims inflation, social inflation — higher court awards and settlements — and the market’s overall lack of profitability prior to the pandemic, Mr. Bruno said. 

“The fear is if we find ourselves at or above 2019 exposures because of claims inflation we’re likely to exceed 2019 loss activity. If the market doesn’t continue to adjust pricing upward, at some point underwriters are likely to be playing catch-up again,” Mr. Bruno said.

Insurers may want rate increases, but they may struggle to achieve them because the premium base will inflate due to the rebound in domestic passenger traffic, said Jason Saunders, Atlanta-based president of Willis Towers Watson Aerospace, a unit of Willis Towers Watson PLC.

In its Insurance Marketplace Realities report published in November, Willis predicted that airline rates would be flat to plus 10%. That compared with predicted rate increases of 25% to 40% at the same time last year.

Another positive factor for buyers is that fresh capacity is entering the market and established insurers are releasing more capacity, potentially increasing competition for business.

“More capacity makes the placement easier. It also drives competition among the markets to drive the best price for the buyer,” Mr. Saunders said. 

Certain markets have expanded their lines and their ability to participate on airline risks, Mr. Hanrahan said. An insurer that only had 2.5% capacity in 2019 and 2020 might take 7.5% in 2021, he said.

Minimum premiums, which insurers applied at last year’s renewals to protect their premium base when airline exposures were down, have come under some pressure, brokers say.

Whereas before insurers were perhaps seeking a minimum premium of 85% of the premium they quote, “now it’s going to be some number less than that,” Mr. Saunders said.

While some insurers are still looking for minimum premiums, “in some cases brokers have successfully negotiated maximums to counterbalance that,” Mr. Trotti said.

“There is some room for negotiation because each risk is unique,” he said.

From the liability perspective, there hasn’t been a catastrophic accident of a U.S. air carrier since 2009 and the immediate issues out there are “minor,” said Mark McKinnon, partner at Fox Rothschild LLP in Washington.

The potential for large-scale COVID-19 liabilities for airlines — either from passengers claiming they got sick on airplanes or suits from employees claiming they got COVID on the job — has been “the dog that didn’t bark,” Mr. McKinnon said.

When there is a lack of demand it’s usually the less-efficient planes that get put into storage, which serves to further improve reliability, Mr. Trotti said. 

Potential interference with aircraft electronics arising from the use of 5G telecommunications technology is a longer-term liability concern on the horizon, experts said.