Fuel, fragility, and the new risk frontier for travel insurers

The warning was blunt: Europe may have as little as five weeks of jet fuel remaining.  

The assessment came from Fatih Birol, Executive Director of the International Energy Agency (IEA), who cautioned that supply constraints linked to ongoing geopolitical disruption could quickly translate into operational impact for aviation. He warned that, if conditions persist, “we will soon hear the news that some flights… might be cancelled as a result of lack of jet fuel”. 

Birol also painted a sobering picture of the wider global repercussions, describing what he called “the largest energy crisis we have ever faced”, driven by the blockade of oil, gas, and other critical supplies through the Strait of Hormuz.  

“In the past, there was a group called ‘Dire Straits’. It’s a dire strait now, and it is going to have major implications for the global economy. And the longer it goes, the worse it will be for the economic growth and inflation around the world,” he told The Associated Press.  

Daniel Green, Co-Founder and CTO of Faye, said uncertainty around the crisis was already raising concerns across the aviation and insurance sectors. 

“No one knows the scale of the crisis or when it will end. Things may get a lot worse for airlines than even the current prices and supply, and even if the situation in the Middle East resolves today, it could be many months before things start to settle. More flights will be cancelled, some carriers will go bankrupt, and, in addition, historically, airlines have a hard time lowering prices when fuel costs go down, preferring to make additional revenue.” 

As geopolitical and energy pressures converge, airlines are moving from observing risk to responding in real time. However, with developments unfolding almost daily, the sector is struggling to maintain clarity amid constant change.

The scale of that pressure is already beginning to surface in airline operations. Last week, Lufthansa announced cuts to around 20,000 short-haul European flights this summer, citing surging jet fuel costs that have rendered several routes unprofitable. The airline expects the reductions to deliver significant fuel savings, but they also underline the extent to which energy volatility is now feeding directly into capacity planning, network decisions, and, ultimately, passenger disruption. 

And it’s not an isolated move. Other carriers across Europe and beyond are also trimming capacity or adjusting schedules in response to sustained fuel price pressure and supply uncertainty, with analysts noting a broader trend towards route consolidation and network rationalisation as airlines prioritise hub efficiency over marginal regional services.  

Air France-KLM adjusted capacity on selected medium-haul services, while Scandinavian Airlines (SAS) has restructured parts of its network in response to elevated operating costs. At the same time, carriers including Air New Zealand, Air India, and Cathay Pacific have all signalled a combination of fare increases, fuel surcharges, and schedule adjustments in response to the ongoing volatility. 

In some cases, this is moving beyond short-term adjustment. Airlines are accelerating restructuring programmes and withdrawing from thinner routes altogether, particularly where fuel costs have pushed marginal services into sustained loss. The result is a more concentrated, less flexible network – one that may prove more efficient for carriers but introduces new layers of complexity and disruption risk across the travel ecosystem. 

Whether that timeline proves accurate is almost beside the point. For travel insurers, the signal is already clear: fuel is no longer a background cost of aviation, but a frontline risk variable reshaping the operating environment. This is not simply another disruption cycle, but the result of geopolitical tension feeding directly into energy supply and aviation economics. It exposes potential weaknesses in how travel insurance has historically priced disruption. 

The immediate impacts are already visible. Capacity is tightening as airlines cut unprofitable routes and consolidate schedules. Prices are rising, not just for fuel but for fares, with knock-on effects for trip volumes, booking patterns, and cancellation behaviour. For insurers, this translates into a more volatile claims landscape – one defined less by isolated disruption events and more by sustained, systemic instability. 

A practical example is already emerging in cancellation and curtailment claims linked to airline schedule changes. Where routes are withdrawn or consolidated at short notice, travellers are increasingly forced to rebook at higher fares or abandon trips altogether. In cases where disruption falls outside airline liability (or where alternative transport is not viable), policyholders are turning to insurers to recover costs. 

At the same time, longer routings and reduced flight availability are beginning to impact assistance cases, particularly in medical repatriation, where fewer direct options can mean extended hospital stays and significantly higher transport costs. For insurers, this creates a dual pressure: rising claims frequency linked to disruption, and increased severity where logistical complexity drives up the cost of resolution. 

Early signals suggest this is also beginning to influence consumer behaviour, with a renewed emphasis on securing cover at the point of booking as travellers seek protection against geopolitical disruption. As Rhys Jones, travel insurance expert at Go.Compare, noted: “The suggestion that jet fuel supplies could tighten in the coming weeks highlights how quickly travel plans can be disrupted by global events.” 

This is also placing greater focus on policy clarity at the point of sale. Jones encourages customers to review annual policies more carefully, particularly around regional exclusions and coverage limits. Higher-cost destinations, including the US and parts of the Caribbean, may require enhanced cover, while limits on trip duration, cruise travel, and specialist activities are coming under greater scrutiny.  

In a more volatile travel environment, gaps in cover that may previously have gone unnoticed are becoming more material – both for customers and for insurers managing expectations and outcomes.

Traditionally, disruption has sat at the periphery of travel insurance design. It’s covered selectively, priced cautiously, and often constrained by exclusions. But fuel-related disruption challenges that model. It is not a singular event like a storm or strike; it is a prolonged condition that can have a cascading effect across the travel ecosystem: delays, cancellations, rerouting, supplier insolvency, and, ultimately, reduced consumer confidence. 

For underwriters, this raises a critical question: how do you price a risk that is both systemic and uncertain in duration? Existing models, built on historical claims data and episodic disruption, offer limited guidance. The result is a growing tension between maintaining competitive pricing and protecting loss ratios in an environment where disruption may become the norm rather than the exception. 

At the same time, there is a distribution challenge. The current narrative – urging travellers to “buy early” and check their cover – reflects a reactive posture. But more sophisticated players will recognise this as a moment to reposition travel insurance not as a discretionary add-on, but as an essential component of trip planning in an increasingly unstable world.  

As Green said, insurers should be proactively defining their stance before disruption escalates into claims pressure. “Decide on your position and messaging now – not once the claims are rolling in,” he urged. “Is this covered? Is this a known event? What does your wording say, and what should you be telling existing and prospective customers?” 

Alongside this, several countries are moving towards mandatory travel and accident insurance requirements, signalling a shift towards insurance becoming a structural rather than optional component of travel. In fact, a growing number of jurisdictions – including parts of the Schengen Area, the United Arab Emirates, Turkey, Thailand, Cuba, Nepal, Georgia, and Zanzibar – already require some form of mandatory travel or medical insurance for entry or visa approval. 

There are, however, limits to what insurance can absorb. If fuel shortages translate into prolonged capacity constraints, insurers may face pressure to tighten policy wordings, particularly around known events and foreseeable disruption. The industry has been here before – most notably during the Covid-19 pandemic – and the lessons remain relevant. Clarity of coverage, transparency in exclusions, and alignment between customer expectations and policy reality will be critical in avoiding reputational risk. 

Beyond underwriting and distribution, the fuel crisis also impacts travel risk management and assistance provision. Reduced flight availability and more complex routing increase the operational burden on assistance providers, particularly in medical and repatriation scenarios. Longer transit times, fewer direct routes, and higher costs will all need to be factored into case management and service delivery. 

First, in product design. There is scope for more dynamic, modular policies that allow customers to select enhanced disruption cover, particularly for high-value or complex itineraries.  

Second, in data. Integrating real-time travel and aviation data into underwriting and claims processes could enable more responsive decision-making, particularly in fast-evolving disruption scenarios.  

Third, in partnerships. Closer alignment between insurers, airlines, and travel providers may offer new ways to share risk, manage customer expectations, and streamline outcomes. 

The industry must rethink how it approaches risk in an era of overlapping systemic pressures. “Actuarial science is just as much art as it is science, but changing climates, geopolitical instabilities, and the availability of oil – a finite resource – are all considerations for how you think of risk,” highlighted Green. “You should price it as accurately as you can, and [not] expect that just because this crisis will resolve, that there won’t be a next one. That’s why customers need and deserve options for insurance coverage.” 

Perhaps most importantly, this moment demands a shift in mindset. Of course, the fuel crisis is not an isolated shock; it is part of a broader pattern of systemic risk – from climate events to geopolitical conflict – that is redefining travel. 

It's no longer a question of whether disruption will occur, but how persistent it will be – and how well the industry is equipped to respond. Those that continue to treat disruption as an exception will find themselves increasingly exposed. Those that build for volatility will not just weather the current crisis, but help define the next phase of travel insurance.