Featuring:
As the aviation industry rebounds from a massive pandemic-induced downturn, aviation insurance rates are rising as insurers seek to address prior-year losses and the industry’s evolving risks. Interest in private jet purchases and rentals have surged as more business fliers and individuals avoid public carriers for health reasons. The pandemic has also provided an extra boost to the rapidly growing unmanned aerial vehicle industry since camera-equipped drones can perform many tasks at lower risk and without personal contact.
Rising insurance prices in the aviation industry come amid historic losses for commercial aviation. The COVID-19 pandemic made 2020 the worst year in history for air travel demand, according to the International Air Transport Association.1 The IATA expects net airline industry losses of $47.7 billion in 2021, which marks a massive improvement from estimated net losses of $126.4 billion in 2020.2
As the aviation industry recovers, it faces an insurance market that has been hardening for several years. The rise in rates for aviation coverage has followed big losses such as the disappearance of Malaysia Airlines Flight 370 with 239 people aboard in March 2014. Five years later, two crashes of Boeing’s recently introduced 737 Max within five months added impetus to the insurance market hardening: An Indonesia Lion Air Boeing 737 Max crashed in October 2018, killing 189 people, and in March 2019 an Ethiopian Airlines Boeing 737 Max crashed shortly after takeoff with 157 people aboard. The losses extended beyond the crashes as hundreds of Boeing 737 Max airliners were grounded around the world, resulting in significant grounding liability claims in addition to liability and hull loss claims.
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Do you want to take your career to the next level? Join #TeamCRC to get access to best-in-class tools, data, exclusive programs, and more! Send your resume to resumes@crcgroup.com today!
Featuring:
As the aviation industry rebounds from a massive pandemic-induced downturn, aviation insurance rates are rising as insurers seek to address prior-year losses and the industry’s evolving risks. Interest in private jet purchases and rentals have surged as more business fliers and individuals avoid public carriers for health reasons. The pandemic has also provided an extra boost to the rapidly growing unmanned aerial vehicle industry since camera-equipped drones can perform many tasks at lower risk and without personal contact.
Rising insurance prices in the aviation industry come amid historic losses for commercial aviation. The COVID-19 pandemic made 2020 the worst year in history for air travel demand, according to the International Air Transport Association.1 The IATA expects net airline industry losses of $47.7 billion in 2021, which marks a massive improvement from estimated net losses of $126.4 billion in 2020.2
As the aviation industry recovers, it faces an insurance market that has been hardening for several years. The rise in rates for aviation coverage has followed big losses such as the disappearance of Malaysia Airlines Flight 370 with 239 people aboard in March 2014. Five years later, two crashes of Boeing’s recently introduced 737 Max within five months added impetus to the insurance market hardening: An Indonesia Lion Air Boeing 737 Max crashed in October 2018, killing 189 people, and in March 2019 an Ethiopian Airlines Boeing 737 Max crashed shortly after takeoff with 157 people aboard. The losses extended beyond the crashes as hundreds of Boeing 737 Max airliners were grounded around the world, resulting in significant grounding liability claims in addition to liability and hull loss claims.
Visit REDYIndex.com for critical pricing analysis and a snapshot of the marketplace.
Do you want to take your career to the next level? Join #TeamCRC to get access to best-in-class tools, data, exclusive programs, and more! Send your resume to resumes@crcgroup.com today!
It's no secret that the pandemic hit the aviation industry hard. 2020 was the worst year in history for air travel demand, the International Air Transport Association estimated losses to be at $126.4 billion 2020. One's estimated losses are predicted to be less than half of that at 47. Point 7 billion. compare those statistics with the fact that the aviation market was hardening before COVID-19. And you realize that the industry faces significant challenges, but the airline industry is here to stay and they need insurance coverage. That's where Camille Knight comes in. She's a senior broker with the CRC Indianapolis office and is new to CRC but has extensive experience in writing aviation industry risks. We'll talk to her next here. Welcome to the placing you first podcast from CRC group. I'm your host Dan Wentz. And this podcast features news and insights from CRC group's vast knowledge base of 4300 plus associates who write in excess of $23.5 billion of premium annually, and we're giving you insider access to what's happening in our company and the types of insurance we place. This is the placing you first podcast we're joined with Camille knight who is sort of brand new to CRC. A couple months in with us here, it's CRC group. And you know, you've got an interesting story. You focus primarily on aviation. I specialize in this stuff.
Camille Knight:I do. Yeah. So.
Dan Wentz:So what all does that incompetent mean aviation's kind of a big world. And we don't talk about it a lot here on this podcast, that's for sure. This is our first aviation focused podcast. So maybe you can talk about a little bit about what you do and what all that entails. Sure,
Camille Knight:yeah, well, a common misconception is that aviation insurance strictly deals with just aircraft insurance. While I do write a lot of aircraft insurance, there's more to it than that. Many of your other property and casualty forms are going to exclude any type of aviation exposure. The majority of aviation insurance policies are written by the respective insurance company and not on standard ISO forums. Examples of this are airport liability coverage, general liability coverage for maintenance facilities, and product liability coverage for these aviation parts manufacturers. Workers Compensation is also a type of coverage that can benefit from working with an aviation insurance company. They're able to provide better loss control resources that are tailored specifically for an aviation exposure. You'll also be working with things professionals with aviation experience, and most of them actually have an aviation background as well. Wow, that's great.
Dan Wentz:So how did you get into specifically focusing on aviation? Is this interests you more than other parts of insurance?
Camille Knight:Do? You know I think that focusing on aviation, it just encompasses, like you said, a whole different world, I mean, you're gonna have your aircraft insurance that provides Hall and liability coverage. But I also get to deal with, you know, workers compensation, as well as general liability coverage. So there's so much that encompasses aviation that it's a different risk every day that I can work on.
Dan Wentz:Yeah, and that sounds fun and exciting, for sure. So let's, let's talk a little bit about this. What's going on currently in the aviation industry and how it relates to aviation insurance, specifically, the pandemic has hit the sector pretty hard from what I understand. People weren't flying last year, right. So maybe you can talk a little bit about how that how the pandemic is playing into aviation insurance kind of setting the tone here.
Camille Knight:The pandemic entered a time in the aviation insurance industry when the market was already in the process of hardening. Like you said, with the lockdowns in place, airlines weren't as busy because people weren't flying. Other aviation operations such as IPOs flight schools and maintenance facilities were also not able to generate much revenue. Unfortunately, the aviation insurance market has continued to steadily increase their rates, despite the lower revenues from 2020 aviation operations. In addition, the lower revenues coverage concerns that we didn't really have before such as loss of business income due to grounding and communicable diseases like COVID have been rising and aviation insurance carriers are still trying to come up with solutions for these types of exposures. So while the pandemic certainly hasn't helped the aviation insurance industry, the hardening aviation market was already in effect and was not you know, did not benefit from the current pandemic. So when I started in this industry, almost 10 years ago, we were in the middle of a soft market. Stock Market continued for a few more years, until a few major catastrophic claims, such as the Malaysia Airlines tragedy, and then the grounding of the Boeing 737. max started to pay out multiple insurance companies were, you know, on the hook and involved in those claims. So ultimately, that resulted in higher rates and more stringent requirements in the general aviation insurance marketplace.
Dan Wentz:Yeah. And you don't think, you know, there's been so much that's happened in the past two years, you almost forget about the 737 issue. And that was a big deal before COVID hit?
Camille Knight:Yeah, that
Dan Wentz:was in the news. This is planes, we're having issues. Yeah. And I mean, you have,
Camille Knight:you know, the big losses, you know, the Kobe Bryant helicopter crash, lots of other crashes. So you think about the limits involved with those. And the number of passengers on those airlines and the high net worth individuals. I'm involved with the liability suits, especially you know, Kobe Bryant's family, I'm not only does that gain, you know, a lot of you know, media about it. But there's also high limits at stake.
Dan Wentz:And that definitely will affect everybody else. Yeah, rates, right. So what is happening on the rate front, with all that being
Camille Knight:considered rates, for the past two or three years have been increasing about 25 to 30% or more in the last few years. Um, unfortunately, it seems that the industry is trying to repair the effects of a soft market by rapidly imposing these higher rates. We've also had a few of the insurance companies that wrote these aviation policies exit the marketplace. So that's led to less capacity within the space as well. So unlike other sectors in the aviation, or in the insurance industry, in general, aviation insurance is only written by a handful of cares. Having an insured or retail agent approach, multiple insurance brokers only muddies the waters when it comes to getting the best terms for your insured because it's just going to lead to blocked markets and duplication of effort. So my recommendation, obviously, is to work with one knowledgeable broker that has strong relationships with the underwriters to obtain the best terms possible in this aviation industry. Yeah, and
Dan Wentz:if you're looking for someone who's who's got those relationships, I mean, here's Camille. Yeah. He definitely have it right now. And that's great. Yeah, I can I can just imagine a retail agent trying to go out and do this all on their own. I mean, that would, that would certainly could end up, you know, costing them the account, I would think if they blocked the markets, and they're not, especially with the rate situation, the capacity, you got to have someone who knows what they're doing specializes in exactly.
Camille Knight:Um, you know, having somebody knowledgeable about aviation insurance, talking to these underwriters, you're able to negotiate better terms because everybody has a clear and concise understanding of the risk. And knowledgeable broker is able to ask the pertinent questions and do a lot of the pre underwriting beforehand, which leads to making it easier for the underwriter to understand it and more willing to work with you.
Dan Wentz:So more people are flying private nowadays. I would assume that's because they're, you know, they feel more comfortable flying, right? With COVID, and everything else going on? What What should those types of accounts be aware of when it comes to insurance? Obviously, that would be a little bit different than just regular run of the mill aviation insurance if you're got a private jet.
Camille Knight:Oh, sure. Obviously, with private jets, you're going to be dealing with a more expensive aircraft and probably more high net worth individuals flying in those aircraft. So the flying community is a pretty tight knit crew. This leads to a lot of conversations by aircraft owners pilots, where they discuss insurance terms coverage and requirements. One thing that I like to stress because I've had this conversation with insurance retail agents is that aircraft coverage is not all apples to apples. There are several factors that go into writing an aircraft such as the type of aircraft the age, the use of the air. craft the pilot experience where the plane is going to be going and the limits they're going to need. I would encourage any potential buyers of aircraft insurance to provide as much information as possible on their application, especially when it comes to pilots, if they are going to be utilizing pilots who may not have as much experience in the aircraft that they are purchasing, having a detailed training plan and timeline will work to their benefit and obtaining the best insurance that they can get
Dan Wentz:a lot to consider there and you don't really, you know, I take it for granted, I fly commercial. So I just assume the pilots good to go, you know, you don't really have a relationship with him. But when you get into private, yeah, you're gonna be hiring pilots to operate your jet, so does the size of the jet matter. So say you've got a big private jet is that treated differently than a small private jet.
Camille Knight:So it is not the size of the jet really, but the, like I said, the experience of the pilot or pilots operating the jet that's going to, you know, be the most of concern. So, you know, you can have a jet that holds, you know, 15 to 20 people. And, you know, if you have a pilot that are pilots that are highly experienced that shouldn't, you know, be that big of a concern. However, you're going to want a dual crew complete, comprised of strong pilots with lots of experience specifically in that making model. And they're also going to need to have done formal training at a school that offers a flight simulator. Another factor to consider when insuring jets that can carry more passengers is the liability limit. There are usually high net worth individuals in this jets. So I would advise the insured to obtain the highest limits they can afford and obtain.
Dan Wentz:What about those those people who rent an aircraft and don't actually own the aircraft? Are there differences there?
Camille Knight:Yes, so there's two different types of non owned aircraft coverage. One is for you know, your regular individual who was starting to fly and wants to rent a light aircraft for their own personal and business use, I can provide a non own aircraft policy, which will give coverage for bodily injury, property damage, liability for anything that they're liable for, as well as non owned physical damage coverage for the aircraft itself. One thing I do want to note is that non owned aircraft liability will be secondary and in excess of any primary insurance available for the aircraft. pilot will need to confirm that they will be considered an insured approved pilot on the primary policy and not solely depend on their non owned aircraft liability for coverage. Another type of non owned liability is the corporate non owned liability. This is where the companies, you know, rent jets to fly them for corporate travel. Again, this non owned coverage is going to be secondary and an access of the primary insurance so the insured will need to be listed as an additional insured on the primary policy for the aircraft that they will be renting.
Dan Wentz:What about drones? Are drones insurable? That's what you when you think aviation you don't really think drones but that Yeah, honestly, is it? Yeah. Is that something you
Camille Knight:dabble into? Yeah. Essentially drones, especially whenever they're used for a commercial purpose. All of that is regulated by the Federal Aviation authorities. So yes, I can insure those, especially if they are being used commercially. They've definitely risen in popularity in the last five years, especially with a pandemic. And, you know, more of these other types of businesses are using it such as real estate. A lot of roofers are using it for roof inspections, photography, aerial surveying. So these drones are going to be regulated by the FAA. They are going to have to abide by the FAA drone rules also called the part 107 rules. These rules require all of the commercially used drones to be operated by those who have obtained their remote pilot certifications. There's also other regulations in place such as having a remote identification that will contain information to identify the drone making sure that drone is not flown in any into any commercial airspace, not you know, hurting anybody are, you know, have the potential to lean on anybody.
Dan Wentz:And that's a that's an area that I would think is about to explode because everyone's talking about using drones for warehousing like the Amazon stuff and the Yeah, that there's gonna be more and more drones in the sky as time goes on.
Camille Knight:Yeah, sure. I think it's going to be inevitable, especially, you know, with, as many of us ordering things from Amazon, we're gonna have those drone delivery services, probably in the near future, I think that the FAA still has a ways to go in being able to regulate payloads being dropped from the drones. However, I wouldn't be surprised if we are seeing it, hopefully, probably in the next five or six years or so.
Dan Wentz:That would be a great account to have.
Camille Knight:Yeah, well, I don't know. Maybe a few years after they've, you know, tested it thoroughly is figured out, I want to write. If anybody has a risk like that, I'll be more than happy to look at it. Okay,
Dan Wentz:so we've got a lot of retail agents listening to this podcast, what are some key takeaways that you have for them as they move forward and placing aviation insurance?
Camille Knight:Sure. Aviation insurance is a very niche market, and it requires experience and expertise in this industry. Working with one knowledgeable aviation insurance broker who has access to the pertinent aviation insurance carriers, is critical in gaining the best terms for your clients. A good broker will make sure all of the key factors of the aviation risks are thoroughly discussed to ensure that insurance companies have a clear understanding of the risk profile underwriters really appreciate that and they appreciate the pre underwriting and in turn will provide us the best terms possible. Okay, great.
Dan Wentz:Well, thank you very much for joining us coming on. I appreciate it. And hope to talk to you again soon. This is one of the more interesting podcasts I've been able to do. Yeah, aviation is so different, right?
Camille Knight:Definitely is