Aircraft and Aviation Insurance

There currently are three broad types of aviation insurance companies in the world.

• The first type of insurance is where carriers pool their resources in order to provide coverage.

• The second type of aviation insurance is where specific individual insurance companies provide the coverage directly on their own forms and policies.

• Finally, there are Lloyd’s of London correspondents that provide coverages and policies which are very similar to the pooling type of carriers.

There are five broad sectors in the marketplace that typically purchase aircraft/aviation insurance.

1. General aviation covers all aviation except the airlines. As far as numbers go general aviation by far has the most planes that are insured.

2. Airlines whether they are national carriers or regional carriers or private carriers make up the bulk of the insurance buyers whose premiums are by far the greatest as respect to the size of premiums.

3. The distribution channels of airplanes, from manufacturers to distributors to wholesalers and finally retailers also are purchasers of aviation insurance.

4. Airports purchase aviation insurance and there are two basic types.

a. The commercial airport which deals with airlines, and the
b. Fixed base operators that primarily deal with general aviation planes and pilots.

Aviation insurance is unique in many ways but one of the most specific uniqueness is that most claims tend to be catastrophic in nature and not minimal losses or damages. Loss of life, loss of the aircraft and loss of revenue is enormous when there is an aircraft catastrophe.

Aircraft policies are very similar to ocean marine policies. Typically aircraft liability and property policies have limitations with regards to pilot experience, types of aircraft, types of cargo on board, and the geographical destinations all coming to play in aircraft insurance contracts.

The underwriting for aircraft insurance has its own unique characteristics. Some of the typical areas of concern for the underwriters which goes into the underwriting process are that of:
• Pilot experience, specifically the hours they have flown and what type of aircraft they have flown in. The vast majority of commercial airline pilots has usually come up thru the military ranks and has the required hours that are needed in order to fly commercial airlines. On the general aviation side that is normally not the case. Recreational pilots tend to be the norm.
• The type of aircraft that is being flown and the
• Purposes of the flights are an important underwriting concern.
• As in all policies underwriters are concerned with past claims and losses or potential for losses.
• Currently one of the biggest concerns in aviation risk management underwriting is with regards to the flight path of the aviator and its aircraft. There are many hotspots in the world with terrorist activities, pirates, global unrest and the like. Flying in known geographical areas where there is war or rumors of war and unrest can be considered very high risk from an underwriting standpoint.

The premiums in the aviation industry typically fluctuate based upon catastrophic events. After the 9/11 terrorist attack in New York, the aircraft insurance premiums skyrocketed, and compounding this was the lack of flying by the general public which caused revenues to go down for the airline industry. Airline premiums tend to be more of a feast or famine type of cycle versus steady increases or steady declines. Aviation insurance can be tailor-made to your specific need or exposure. You can purchase specific policies for each exposure or you can custom design an aviation insurance policy with endorsements that include the needed coverages that you desire.

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