(September 2020)
Aviation insurance is a specialty coverage which requires both specialized underwriting and production facilities. It is written by a relatively small number of insurers, most of which are specialists in the field. Since insurance agents get very few requests to write an aviation insurance policy, most agents rely on representatives of the major aviation insurance markets for technical assistance in arranging coverage.
The few aviation carriers and the high demand for their products make it critical that submissions for quotes and policies contain complete and accurate information. An application must be submitted for every aviation risk and the basic, required information must include the following:
1. Name, address, age, and business of the aircraft owner
2. Aircraft make, model, year of manufacture and value
3. Purposes for which the aircraft will be used. This should match with the information found in the aircraft’s air worthiness certificate - see below.
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5. Types of hull and liability coverages desired
6. Past loss experience.
Certain commercial risks, such as pilot instruction, aircraft rentals and air taxi operations, as well as special types of aircraft such as seaplanes, amphibians, and helicopters, require more underwriting data. Besides the application, agents and brokers must also submit pilot history forms for each pilot.
Related Article: Pilot History Form
Aviation underwriting, particularly for general aviation exposures, is concerned with certain aspects of the persons operating the aircraft. Applications and supplemental information requests will focus on developing as much information as possible on:
· What aircraft ratings/endorsements are held by the pilot(s)
· Amount of flight experience (overall and his or her familiarity in the particular aircraft for which insurance is being sought)
· The pilot's level of on-going (recurrent) training
Note: Besides the requirement that pilots undergo a formal flight review every two years, it is important that pilot training be kept current with more frequent training for more complex aircraft. Typically, when a pilot is operating larger and faster craft, annual (including instrument/simulator) training is necessary.
· The manner in which the pilot will use the aircraft
· The pilot's loss history
Concerns an insurer may have about a pilot's age are similar to concerns about motor vehicle drivers. The problems tend to be associated with the extremely young and extremely old pilots. The former cause a problem because of the lack of flying experience and the latter because of, typically, deteriorating operating skills. However, compared to younger, inexperienced pilots, older pilots tend to be a superior risk as their level of flight experience is usually accompanied by a high level of fitness, a greater adherence to flight operation rules and acquired training.
Note: With the recent years trend in the reduction of pilots in the U.S., age may be underwritten differently, and health and competence may take precedence.
Generally, a well-maintained aircraft with solid documentation via a maintenance log is a desired risk. However, at some point, the age of an aircraft becomes a problem due to metal fatigue, and lack of new instrumentation and other features.
Since training is important for pilots, underwriters usually require that it take place only at schools that are approved by aviation insurance companies. Some insurers even have affiliations with certain training centers. Naturally, training information provided by a pilot must include where such training took place.
Any aircraft must have a current airworthiness certificate which is issued by the FAA. The certificate, which must be displayed in an aircraft, documents the fact that a craft has been inspected and found to be free of any defect or condition that would affect its safe operation. Initial worthiness is determined after a thorough review by a qualified inspector.
“Worthiness” depends not only on the aircraft’s condition, but also upon whether it is used according to its design and intent. Certificates are issued according to different operation categories including:
Aircraft maintenance records (AMRs) are detailed manuals that show a record of all necessary, routine maintenance and repairs undergone by an individual aircraft. Such records should detail all activity since the craft entered operations and such manuals must be transferred along with any change in ownership. Unexplained gaps in such records are a serious red flag. Any entry must consist of the following:
An aviation insurer must be concerned with a submission’s adherence to safety. Are the pilots experienced and properly trained? If they employ mechanics, do they also have substantial experience and training? Do they take advantage of training and recommendations that are commonly offered by aviation manufacturers? What ground and flight schools are used in training?
Does the submission dedicate enough resources to a solid safety program including the use of technology that enhances safety? Does it use full-time pilots, mechanics and other employees who tend to have better safety results than part-time help? Does the submission have meetings on safety that support proper awareness that contributes to a culture that values safety?