Aviation Insurance – What you need to know
Aviation insurance is a policy that offers property and liability coverage for aircraft. It covers losses resulting from aviation risks that come about due to the maintenance and use of aircraft, property damage, loss of cargo, or injury to people. It protects both its owners and aircraft operators from unforeseen losses. Aviation insurance is also known as aircraft insurance.
The story so far
Aviation Insurance was first introduced at the beginning of the 20th century. The first-ever aviation insurance policy was written by Lloyds of London in 1911. And the first specialist aviation insurers emerged in 1924. In 1929, the signed Warsaw convention was an agreement to establish terms, conditions and limitations of liability for carriage by air, and this was the first recognition of the airline industry as we know it today.
Aviation insurance today
Today, the IUAI (International Union of Aviation Insurers) is the voice of the aviation insurance industry worldwide. Their members are the insurers and reinsurers who, between them, provide cover for every aspect of the aerospace business, the aviation insurance business, and the aircraft and airplane insurance business.
The London insurance market is the largest single centre for aviation insurance within the IUAI and this market is made up of the traditional Lloyds of London syndicates and numerous other traditional insurance markets. Airline catastrophes have cost insurers hundreds of millions of pounds and dollars which is why the aviation insurance market is made up of syndicates of insurers represented by the IUAI rather than single representatives.
Aviation in itself is not inherently dangerous. But to an even greater degree than the sea, it is terribly unforgiving of any carelessness, incapacity or neglect.
Captain A.G.Lamplugh, chef underwriter and principal surveyor of British Aviation Insurance Company (1931).
Aviation Insurance – hard facts
- The global aviation insurance market is estimated to be worth £606m, with a sizeable proportion of this underwritten in Lloyds
- Since the 9/11 attacks in 2001, and subsequent claims from two Malaysia Airlines crashes, fighting at Tripoli airport, the loss of an AirAsia plane off the coat of Indonesia, a TransAsia Airways crash in Taiwan, and the Germanwings plane crash in The Alps in 2015, the 327-year-old city institution of Lloyds has faced multi-million-pound insurance payouts.
- Insurance giant Allianz believes the aviation insurance market is likely to become even riskier in the future with the likelihood of cyber attacks and drones being used for commercial use.
- There are fewer than two passenger fatalities for every 100m passengers on commercial flights.
- Aviation risk is split into two main areas: ‘hull risks’ that cover the aircraft, and ‘liability’ that covers third-party damage, including the loss of passenger’s lives.
What does it cover?
Aviation is one of the world’s most highly regulated and complex insurance industries. Aviation insurance policies are extremely broad, they can cover war perils and there aren’t any exclusions for flood or earthquake. The policies are considered ‘All Risk’ and they truly provide coverage on an all risk basis. There are four major sectors of aviation insurance: airline insurance, aircraft product liability, general aviation, and space.
Operators of aircraft are required by law to have certain minimum levels of insurance. The precise level depends on the Maximum Take-off Mass (MTOM) of the aircraft and on the number of passengers carried.
Aircraft operators’ insurance must cover:
- Third party cover
- Risks of war and terrorism (war risk)
Find out more
To find out more about the different types of aviation insurance and how we can help click here.