Lloyd's of London wrote the first aviation insurance policies in 1911, when the company agreed to provide legal liability insurance to some planes that were participating in a meet. The demand for aviation insurance remained low through World War I. It picked up in 1919, as the civil air transportation industry began to grow.
Unfortunately for Lloyd's of London, the weather was bad on the day of the meet in 1911. This resulted in many plane crashes and significant losses for Lloyd's. The company pulled out of the business entirely in 1912.
During World War I, the demand for aviation insurance was nonexistent. But by 1919, the civilian transportation industry heated up, beginning in the United States. It started with World War I pilots, who put their skills to use by buying up old war planes and staging air shows. However, losses were high and few insurers were interested in the industry as a result.
In mid-1919, the Travelers Insurance Company wanted to change all that. It unveiled the first comprehensive airline insurance policy for the commercial and private markets. Its intent was to provide incentives for manufacturing and using airplanes. The company suffered may losses, however, and pulled out of the market by 1931.
Several other insurance companies got into the business, but it wasn't until Charles Lindbergh's famed crossing of the Atlantic in 1927 that the aviation industry began to grow. This, combined with the first airway regulations and a law that allowed for the shipping of mail by private carriers, served to stabilize the industry.