Commercial airlines can expect ongoing rate hikes of 40% and higher for aviation war coverage at upcoming renewals as the Israel-Hamas war continues to unfold, brokers say.

Airlines that continue to operate in and out of Israel and Lebanon are already being charged additional premiums as aviation war insurers respond to the increased level of risk in the region, they said.

There’s a much more acute sense of risk in the current market, said Edward Bond, London-based partner, aviation and aerospace, at McGill and Partners.

Airlines flying to Israel and Lebanon are paying additional premiums, but it “depends on the frequency of flights, whether the airline in question had scheduled operations going into Tel Aviv already or whether it is a humanitarian flight,” Mr. Bond said.

“Each category is treated slightly differently. There’s no broad-brush approach,” he said.

Insurers continue to have an appetite to write war risk coverage, said Garrett Hanrahan, Dallas-based global aviation leader at Marsh LLC.

“The risk profile is heightened so underwriters are looking to charge additional rate to assume that additional risk,” Mr. Hanrahan said.

Underwriters require airlines to have all necessary permits and approvals prior to operating in and out of the region, and the maximum number of hours that aircraft are allowed on the ground in Israel is three, he said.

Many major airlines have canceled or suspended flights in and out of Israel since the conflict began Oct. 9.

War risk policies typically contain a seven-day notice clause that allows insurers to amend or cancel cover, and to review rates or terms and conditions in the event of a major conflict, according to brokers.

Most underwriters are working with brokers and policyholders affected to come up with a mutually acceptable outcome, but that “almost always has involved a notice of cancellation,” Mr. Bond said.

“At the end of that notice period, most underwriters are probably extending coverage” but perhaps moving the notice period back from seven days to something like 48 hours, so they can react more quickly, he said.

“If you’re a domestic carrier in Israel, for example, you would almost certainly be expecting the international hull war market to react like that,” he said. Humanitarian aid flights would not be subject to the seven-day notice, he said.

Israel’s parliamentary finance committee in mid-October approved a plan to provide a state guarantee of $6 billion to cover insurance against war risks to Israeli airlines.

Meanwhile, commercial airlines should expect continued rate increases for hull war and excess war liability coverage in the fourth quarter, when many renew their insurance programs, brokers say.

About 75% of airlines renew their insurance programs in the final quarter of the year.

Worldwide, rate increases for hull war coverage are starting to level off from levels seen earlier this year or a year ago, said Jason Saunders, Atlanta-based managing director, head of global aviation and space-North America, at Willis Towers Watson PLC.

“The floor is about 40%,” but it depends on what aggregate limit airlines are buying and where they fly, Mr. Saunders said.

“Last year there was more of a targeted tariff rate that underwriters were trying to achieve across the entire portfolio. What we’re seeing now is more logic and underwriting applied to each and every individual airline rather than looking at it on a blanket basis,” he said.

Excess war liability rate increases have lagged the hull war market since the Russia-Ukraine war began last year and hundreds of Western aircraft in Russia were confiscated, Mr. Saunders said.

“They tend to be playing a bit of catch-up, so the increases we’re seeing in the excess war liability market are more in line of 75%,” he said.

Hull war rates effectively doubled following the confiscation of aircraft in Russia, Mr. Hanrahan said.

At the start of 2023, there was an estimated $325 million to $350 million of worldwide premium in the aviation hull war market, he said.

In April of this year, the market suffered an estimated $300 million-plus loss when several commercial aircraft at Khartoum International Airport were destroyed in clashes between rival factions in Sudan.

“Effectively the worldwide premium was wiped out,” Mr. Hanrahan said.