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How analytics and modelling unlock value in aviation insurance programmes

Analytics help organisations better control insurance programmes and balance retained risk with insurer transfers, trading predictable costs for greater volatility.

08/07/2026 · 5 minute read

Many aviation organisations are awash with data. But turning that data into actionable insights and a strategic asset requires actuarial analysis. And while the data is generally available, bringing together different datasets is not always easy — which is where support can make a real difference.

At the recent Marsh Aviation Summit 2026, Brad Saunders, Marsh UK Head of Analytics; Jason Mitchell, Actuary, Risk Finance Solutions; and Rebecca Meehan, Marsh Advisory, Client & Customer Services, discussed some of the strategies aviation organisations can use at the analytics and modelling workshop. Their insights are below.

A different approach to risk transfer in the aviation industry

At the heart of any insurance decision within an aviation organisation are often difficult choices. How much loss can a business absorb and still survive if things go wrong? Should it pay more each year for broader insurance protection? Or should it accept more volatility, on the basis that risk management will help keep losses at bay? Analytics can help organisations gain greater control over their insurance programmes and to strike  the balance between the risks they retain and those they transfer to insurers that is right for them — weighing more predictable annual costs against the volatility that can arise even in an otherwise normal year. By bringing together better data, clearer modelling, and a more structured view of exposure, aviation organisations can make more informed decisions about coverage, resilience investments, and long-term financial stability.

But many renewals in the aviation sector do not make full use of analytics. They often begin with last year’s structure: the deductible, the limit, and the premium. Insurers are then approached to see how those terms might change.

For aviation organisations ready to take a more analytical approach, the aim is to step back and start with a blank sheet of paper — designing an insurance placement starting with a model of the risk and then testing, from an economic perspective, what makes most sense for the business. The findings give organisations a better understanding of the level of risk they may wish to retain and where insurance can add the greatest value. Crucially, they move from passive buyers of insurance to more active risk transferors.

Take, for example, slips, trips, falls, and other minor injuries, which are common occurrences in the aviation sector. These can be low in value and also create administrative costs for insurers, which can make them less attractive risks to transfer to an insurer under traditional insurance policies. By contrast, more severe or volatile incidents — such as fires, major claims, or aircraft damage — are often better suited to transfer rather than retain.

Understanding volatility is essential to any informed insurance decision

A well-rounded insurance decision should take into account these harder-to-quantify elements, including unexpected volatility or losses that may not occur every year.

Yet in practice, the traditional concept of “total cost of risk,” which typically encompasses all costs an insured organisation can expect to incur when transferring or retaining risk, is sometimes the sole measure considered. This includes expected retained losses below deductibles and excesses, as well as premiums and insurance taxes. It may also capture captive-related costs such as claims handling, fronting fees, collateral requirements, and captive administration fees.

However, our “economic cost of risk” (ECOR) measure builds on this by accounting for year-to-year fluctuations in losses.

Once organisations have quantified their economic cost of risk, they can see the cost of both more known risks and the cost of absorbing volatility over a specified period. Some organisations calculate average annual retained losses internally. However, quantifying volatility can be difficult without advanced statistical methods, which can draw on other organisations’ experience with volatile events. Armed with an economic cost of risk value for the organisation’s current insurance programme and a set of alternative strategies, risk managers can compare the relative economic value of different insurance strategies to better inform and support their decisions.

Putting a price tag on volatility

One approach to transferring risk is to determine how much volatility to transfer and the price range the organisation is willing to pay for that protection. Working within these “guide rails” — alongside other non-analytical placement methods — makes it possible to build a tailored programme that can help absorb shock losses and partially offset the impacts of market cycles.

Predictive analytics can then support a longer-term risk-financing strategy. Multi-year plans with clear guide rails also help guard against pursuing short-term benefits at the expense of long-term objectives.

Why burning costs are especially relevant for aviation

Additionally, burning costs — which reflect the historical cost of claims and the amount these claims would cost if they were to recur today — should be taken into account. These are particularly important in aviation, where the cost of aircraft, parts, and associated services has risen significantly in recent years. By updating historical claim values to present-day levels, the analysis provides a more accurate view of the true cost of risk today.

Elevate your insurance programme from a cost to an asset

In short, risk analytics and modelling can deepen your understanding of your risk exposure and potential loss volatility, helping transform your insurance programme into a valuable business advantage.

Price is only one measure of an insurance programme’s overall cost. Without analytics, it can be difficult to see how different programme structures may affect retained loss costs and volatility. Working with the right partner to quantify the economic cost of risk can help you assess the suitability of different insurance options for your business. A strong analytics and modelling approach can also underpin more strategic engagement with insurers, helping you to refine your insurance purchase and financing strategy.

Speak to a Marsh representative to learn more  and discuss how to transform compliance into a competitive advantage.

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