NBAA News Hour: Adapting to the New Insurance Status Quo

Sept. 21, 2020

Aircraft operators must adopt a proactive mindset toward risk mitigation to get successful results in an increasingly tight insurance market – and even then, may face an uphill battle due to trends out of their control.

Adapting to the challenging new status quo for business aircraft insurance was the focus on NBAA’s latest News Hour webinar, moderated by NBAA’s Director of Flight Operations and Regulations Brian Koester, CAM.

The numbers paint a stark picture: according to Jim Gardner, president of the Aviation Insurance Association, aircraft insurance firms were losing 15 cents on every dollar collected by 2018, resulting in a third of them withdrawing from the market. As a result, premium renewals are more expensive, new policies are difficult to acquire at palatable rates and underwriters are demanding higher standards for risk mitigation, which can put smaller operations in a financial squeeze.

“Perhaps as profitability comes back and the market re-inflates itself, you may find [more] flexibility, but for now insurers are enforcing standards to avoid loss,” said Eric Donofrio, regional chief underwriting officer for AXA XL.

Some contributing factors are out of operators’ control. Insurance is based around pooling risk, and the “wide and varied group” in general aviation – which includes everything from professionally flown business aircraft to helicopters to owner-flown crop dusters – means any aircraft user will be impacted by broader safety incidents, according to John Brogan, president and CEO of United States Aircraft Insurance Group.

However, the way in which the insurance process is approached can still have substantial impacts on the outcome received. Noting that underwriters must be convinced this business decision will earn them a profit, Joe Williams, vice president and managing director with JSL Aviation Insurance, advised operators to work with their broker in a timely fashion to provide a complete picture of their organization’s above-and-beyond efforts to reduce risks.

“Can you demonstrate an SMS and ERP in place? How often is it reviewed and updated? If they don’t know, they can only assume you’re meeting baseline requirements,” said Williams.

Putting resources toward safety training and processes will “hopefully offset insurance premiums in the future,” said Eric Canup, senior vice president-head of flight operations, Live Oak Bank, but he noted that flight departments shouldn’t view those investments as a transactional arrangement. Likewise, Brogan cautioned that unlike larger risk pools such as automobiles, an “If I do X, what discounts do I get” mindset is largely not applicable to an aviation market with higher risk levels and significantly less data.

“We don’t have the millions of exposures to drill down and say this safety product is saving us .5% of the losses that we pay,” he advised.

NBAA members: review a white paper on questions to ask when renewing your policy.