Aviation insurance is insurance coverage geared specifically to the operation of aircraft and the risks involved in aviation. Aviation insurance policies are distinctly different from those for other areas of transportation and tend to incorporate aviation terminology, as well as terminology, limits and clauses specific to aviation insurance.
- Aircraft hull and aircraft liability
- Aviation liability
- Aviation products liability
- Aviation cargo
- Aircraft crew personal accident cover
Aircraft hull and aircraft liability
Aircraft hull insurance covers losses arising from the physical damage to aircraft hull as a result of various perils, including war and terrorism. Aircraft liability insurance covers operators of aircraft for third party liability.
The risk location may be determined by one or more of the following factors:
- Physical location of the aircraft (place of operation)
- Jurisdiction in which the aircraft is registered
- Residence or establishment of the insured
It is possible for a contract to have more than one risk location, if, for example, it covers more than one aircraft and the insured aircraft are registered in more than one jurisdiction. It is also possible for the risk location rules of different territories to overlap, i.e. where one territory determines risk location by insured’s business establishment and another territory determines it by aircraft registration. Therefore a single aircraft can have multiple risk locations.
Aviation liability covers a wide range of legal liabilities associated with airport and other aviation operations, excluding aircraft operations. The risk location is the territory in which the insured is resident or its business is established. If more than one insured resident/business establishment is covered, then each may individually create a risk location.
Aviation products liability
Aviation products liability insurance is taken out to provide coverage for components used in aircraft or other aviation products, e.g. avionic software. The risk location is the territory in which the insured business is established. If more than one insured business establishment is covered, then each may individually create a risk location.
Aviation cargo insurance covers losses arising from the physical damage to cargo while it is in transit by air and for up to 60 days whilst in storage. (After 60 days it will be seen as Property – Standalone storage.) The risk location is usually the territory in which the insured is resident or its business is established. However, in a few instances, where the goods are physically situated or being transported to or from may also create a regulatory and tax location of risk. Please see the territory specific guidance on Crystal for specific risk location rules.
Aircraft crew personal accident cover
Aircraft crew accident insurance provides cover in the event of death or injury to a member of an aircraft’s crew. The insured is normally the aircraft owner or operator. Where the policy is written in relation to a specified aircraft the risk location is determined in the same manner as aircraft liability (see above). Where the aircraft is not specified or is unknown the risk location is the territory in which the insured is resident or its business is established.
THE HISTORY OF AVIATION INSURANCE
Aviation Insurance was first introduced in the early years of the 20th century. The first-ever aviation insurance policy was written by Lloyd’s of London in 1911. The company stopped writing aviation policies in 1912 after bad weather at an air meet caused crashes, and ultimately losses, on those first policies.
The first aviation polices were underwritten by the marine insurance underwriting community. The first specialist aviation insurers emerged in 1924.
In 1929 the Warsaw convention was signed. The convention was an agreement to establish terms, conditions and limitations of liability for carriage by air, this was the first recognition of the airline industry as we know it today.
The London insurance market is still the largest single centre for aviation insurance. The market is made up of the traditional Lloyd’s of London syndicates and numerous other traditional insurance markets. Throughout the rest of the world there are national markets established in various countries, this is dependent on the aviation activity within each country, the US has a large percentage of the world’s general aviation fleet and has a large established market.
No single insurer has the resources to retain a risk the size of a major airline, or even a substantial proportion of such a risk. The catastrophic nature of aviation insurance can be measured in the number of losses that have cost insurers hundreds of millions of dollars.