Aviation insurance is a very specialised industry, which differs in many way from other types of insurance. So how did the industry develop, and what is it like now?
The History of Aviation Insurance
Insurance for aircraft was first introduced in the early years of the 20th century, with the first aviation insurance policy being underwritten by Lloyds of London in 1911. However the company pulled out of the sector a year later after bad weather and crashes caused severe losses.
By 1933 the airline industry was well-established, and it was realised that there needed to be specialised insurance for it. The International Union of Marine Insurance set up an aviation committee, and by 1934 eight European insurance companies wee finally established, and the International Union of Aviation Insurers was set up.
Aircraft Hull Insurance
No single insurer has the resources to accept the risk of a major airline. There have been aviation accidents which have cost insurers hundreds of millions of dollars. Therefore the industry tends to use insurance syndicates of various types.
Most airlines arrange fleet policies to cover all the aircraft they own or operate. Most are covered by ‘All Risks’ policies, but these tend to have a number of exclusions and a fairly high deductible (the uninsured amount borne by the insured). This deductable can range from around $50,000 for a Twin Otter to $1,000,000 for a wide-bodied jet aircraft like a Boeing 747.
Even small general aviation aeroplanes and helicopters may have deductibles well into four figures. Exclusions tend to be for wear and tear, ingestion damage, and mechanical breakdown. War and allied perils are also highly likely to be excluded.
Aviation Liability Insurance
This is usually divided into two categories:
- Liability in respect of passengers, baggage, cargo, and mail carried on the aircraft. These are related to the operations which the airline performs.
- Aircraft third party liability insurance. This is liability for damage done to property or people outside the aircraft itself.
Every airline will need cover for both these categories, and normally obtain them in a single policy. Naturally, small aircraft in remote regions using small airstrips have less potential exposure to risk than large operators using major airports.
General Aviation Insurance
There are a number of aviation insurance companies covering the smaller end of the market, ie privately owned small aeroplanes and helicopters. These of course still need to obtain insurance, both for the aircraft itself and for any liability. It is also possible to find specialised types of insurance, such as flight instructors’ liability insurance, which protects flying instructors against any negligence claims.
Aviation insurance is quite a specialised industry, and those requiring it should take advice from a company specialising in this branch of insurance, or from an aviation insurance broker.
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