1. Aviation Underwriting

2. Aviation Insurance Programme
Presentation By
Vijay Thakur
(Deccan Insurance Services )

12. Aviation History

13. Aviation History
On 17th of December, 1903 Orville Wright flew an aeroplane for 12 seconds covering a distance of 120 feet.
JRD Tata was the pioneer of aviation in India.
In 1932 Aviation division of Tata Sons Limited was set up with mail service. In 1938 the Airline had carried a few hundred passengers too.
In 1946, Tata Sons Ltd., was converted into Air India Limited.

14. Main Airline Insurance Coverages
Hull “All Risks”
Hull “War Risks”
Spares “All Risks” / “War Risks”
Aircraft Liabilities
Third Party
Passenger
Baggage
Cargo and Mail
Excess Liability - Third Party War Risks
Hull Deductible
Aerospace Manufacturers Products & Grounding Liability
Airport Owners & Operators Liability
Product Liability

15. Hull All Risks Coverage
Covers all risks of loss of or damage to aircraft unless otherwise excluded
Covers flight and ground risks
Coverage includes ingestion / Foreign Object Damage (F.O.D.) caused by a single recorded incident
Main Exclusions
Mechanical Breakdown / Wear and Tear
War, Hi-jacking and Other Perils Exclusion Clause AVN 48B
Nuclear Risks Exclusion Clause AVN 38B
Items detached from aircraft and held as spare parts
Loss of Use
HULL - COVERAGE / EXCLUSIONS F.O.D. Stress single recorded incident and normally must require immediate withdrawal from service. Ingestion of small stones, grit, ice etc with gradual deterioration not intended to cover. Mechanical breakdown / wear and tear exclusion - consequential damage covered but engine single unit so all damage within engine excluded.

16. Hull All Risks
Limits
Total Loss / Constructive / Arranged Total Loss:- Pay agreed value as declared by airline and agreed by insurers for each aircraft
Partial losses pay for cost of repairs less deductible
Deductible is also applied to TL/CTL claims of on Rotor Wing Aircraft
Deductible
Jets wide-bodied US$1,000,000
Hybrid US$750,000
Narrow bodied US$500,000
Standard market deductibles may be increased in the future
Separate deductible insurance may be arranged to “buy down” to a lower level
HULL - LIMITS / DEDUCTIBLES Agreed value means that cash is paid - replacement option removed as opposed to “Insured Value”
CTL is normally fixed at 75% or 80% of agreed value.
Deductibles - Turbo-props sub minimum according to weight e.g. ATR72/F50/DHC8 $100,000, Twin Otter / DO228 $25,000. Piston minimum $2,500 single / $5,000 twin.
Higher deductible levels have been discussed within the market and we wait to see what moves, if any, will be made in this area.
Suggested levels:-
US$ 3m for wide-bodied (but US$5m for B777)
US$ 2m for ‘hybrid’ aircraft
US$ 1m for narrow bodied
US$ 250,000 for ‘large’ turbo props
This would make the need for deductible Insurance more pressing and we will discuss this type of coverage later in the presentation.

17. Hull All Risks Additional Provisions:- Missing aircraft
Forced landing, salvage charges and expenses
Cost of repairs
Loss payee provisions (leased / financed aircraft)
Leased components with Stipulated Loss Value
Supplementary Expenses
Search & Rescue Operations, Runway Foaming
Missing Aircraft: - If unreported after certain period of times, eg 15 days
Forced Landing:- In the event aircraft cannot take off again - cost of dismantling, transportation to airport, reassembly, even if no damage sustained
Salvage Charges:- Expenses incurred by Insured in defence, safety, preservation and recovery of the insured aircraft
Cost of Repairs:- Transportation of personnel, materials, tools and equipment to aircraft, or transportation of aircraft to place of repair / cost of replacement parts / Insured’s labour costs etc
Attach of leased engines / components - added to the aircraft  value increases - though must be within Maximum hull aggregate value
Generally adjusted at expiry

18. Hull War and Allied Perils
Coverage
Covers loss of or damage to aircraft by War and Allied Perils as excluded from All Risks policy such as War / Civil War etc. Act of Terrorist, Strike / Riot, Civil Commotion, Confiscation etc., Hijacking
Standard market wording - LSW 555B / LSW 555C
Main exclusions
Hostile detonation of nuclear weapon.
War between UK, USA, France, Russian Federation, China
Confiscation etc. by government of registration
Confiscation etc. for financial reasons.
Repossession by title holder
Delay, loss of use, consequential loss
HULL WAR - COVERAGE / EXCLUSIONS Dovetails with Hull All Risks - but need 50/50 clause. Current clause used is AVS103 which provides for joint All Risks/War payment if applicable policy not identified within 21 days
CBGOR - Can be written back

19. Hull War and Allied Perils
Limits
Each aircraft covered for the same agreed value as under the hull all risks policy subject to a policy aggregate sum insured per annum
Deductible
No deductible
Additional Provisions:-
Extortion and Hijack Expenses (90% of payments properly made)
Leased components with Stipulated Loss Values
HULL WAR
Limits - stress aggregate - started at 3 times top value after Gulf War but then pushed up to around 6. Following 11/9/ times top value aggregate re-introduced.
Extortion / Hi-jacking expense: - (a) Threats against aircraft , passengers, crew, (b) expenses following confiscation (per article (e) of LSW 555B) or hi-jacking (per article (f) of LSW 555B)

20. Hull War and Allied Perils
Cancellation, Revision and Automatic Termination Provisions:-
Insurers may issue 7 days notice to review premium and/or geographical limits at any time
Automatic review of premium and/or geographical limits on expiry of 7 days from hostile detonation of nuclear weapon
Insured or insurers may cancel policy by giving 7 days notice prior to the end of each policy quarter
Automatic policy cancellation in the event of war between UK, USA, France, Russian Federation, China (if aircraft are in the air, coverage continues until first landing)
Any material change must advise to underwriters who may review rate - underwriters can give 7 days notice to review rating
e.g. 0.05% “rolled in” surcharge following 11/9 / earlier example, Gulf War.
Immediate cancellation - Gulf War II
Scheduled flights versus Charter additional flight

21. Spares All Risks Coverage
Covers all risks of loss or damage to spare aircraft engines, parts or equipment owned by the Assured or for which they are responsible
Covers whilst in storage or in transit
Covers Ground Equipments
Covers Engines
SPARES - COVERAGE Is a spare when removed from aircraft and replaced by other property. Need to ensure dovetails with Hull section.

22. Spares All Risks Main Exclusions
Mechanical / electrical breakdown, wear and tear.
War, Hi-jacking and Other Perils Exclusion Clause (AVN 48B) (may buy-back cover normally in conjunction with hull war)
Nuclear Risks Exclusion Clause AVN38B
Inventory losses
Loss arising under process and directly resulting therefrom
Any spare whilst fitted to an aircraft
Inventory Loss - mysterious disappearance or unexplained loss or shortage disclosed upon taking inventory

23. Spares All Risks Limits
Normally insured on a replacement value basis up to value declared - will pay cost of repair in event of partial loss (less deductible). Subject to a limit per occurrence and a sub-limit for any one transit
Deductible
US$ 10,000 each claim, but for engine running/testing losses the hull all risks deductible applies
SPARES - LIMIT / DED / RATING Limit - Depends on value at risk - Often limited to Hull Max for major airline Rating - Lower than Hull as Ground / Transit only

24. Spares War and Allied Perils
Usually arranged in conjunction with hull war
Coverage for paragraph (a) of LSW 555B limited to transit risks only

25. Legal Liability Coverage
Will indemnify against legal liability for bodily injury or property damage suffered by third parties (including passengers baggage and cargo) arising from the aviation operations of the airline and caused by an occurrence
Relates mainly to
Operation of aircraft
Injury to passengers
Damage to cargo / baggage
Operations at airports and other aviation premises
Services to other airlines
Can include war and allied perils “Writeback” per AVN 52D
LEGAL LIABILITY - COVERAGE BI/PD caused by occurrence.
BI can be defined to include injury, sickness, disease, fright, shock or mental anguish
Occurrence - Usually an accident / exposure to conditions which results in BI/PD which is neither expected nor intended from Insured’s standpoint.
Damage BI / PD to third parties
Services to other airlines
Maintenance Ground Handling

26. Legal Liability
Non-Aviation Liability Clause AVN59 defines extent of aviation liability:-
Occurrences involving aircraft or parts or equipment
Occurrences arising at airport locations
Occurrences arising at any other location in connection with the Insured’s business of transporting passengers or goods by air
Occurrences arising out of the supply of goods or services to others:-
in connection with the use and/or operation of aircraft
involved in the air transport industry
Subject to policy conditions and exclusions

27. Legal Liability Main exclusions
"Non-Aviation" risks e.g. Employers Liability / Motor liability
Damage to property owned, leased or rented by the assured
Nuclear risks (AVN38B)
Noise, pollution, contamination, electrical interference (AVN46B).
Hostile detonation of nuclear weapon (Article (b) of AVN48B).
Other exclusions per AVS.104B
LIABILITY - EXCLUSIONS Other exclusions per AVS104B to mention - Liability arising from:-
-Ownership / OP of hotels / resorts / clubs / sports complex -Tour operators / travel agents - activities - but carriage by air covered -Shops / restaurants All designed to exclude cover which should be provided elsewhere.
Liability assured under contract unless otherwise agreed
Insureds vehicles on public highway
Employee Liability
Insured’s property
Illegal activities

28. Legal Liability Limits
Will pay damages assessed against the assured subject to a limit any one occurrence. Plus legal fees and expenses
AVN52D limits third party war liability coverage to USD 50,000,000 each occurrence and in the annual aggregate
Deductible
Baggage US$1,250 Standard Market
Cargo / Mail US$10,000 Deductibles
LIABILITY - LIMITS / DED / RATING Deductible - N/A if aircraft accident
Excess War Third Party Liability will be covered under Section 2
Coverage on a CSL basis
Covering Passenger / Third Party / General TP
Products in the aggregate

29. Legal Liabilities Rating
Departure rate plus per passenger carried basis
US$ amount per 1,000 RPK’s
Smaller risks Third Party Legal Liability (TPLL) US$ per aircraft plus Passenger Legal Liability (PLL) US$ per passenger seat
Following 11/09/2001, “Special Surcharge” of USD 1.25 per passenger introduced for all airlines
Special Surcharge - now “rolled-in”

30. Legal Liability Additional Provisions:-
Funeral, medical, illness, transportation and repatriation expenses
Public enquiry, removal of wreck, search and rescue, runway foaming expenses
Defence, settlement and supplementary payments

31. Legal Liability Additional Provisions:-
Excess “Non Aviation” Liability
Sum insured US$ 25,000,000 any one occurrence and in the annual aggregate, in excess of underlying insurance
Personal Liability (per AVN60)
Sum insured US$ 25,000,000 any one offence and in the annual aggregate
Personal Injury offences e.g.
False arrest/unlawful imprisonment or detention
Malicious prosecution
Wrongful entry, eviction
Inadvertent discrimination in withholding or refusal of transportation (excludes overbooking)
Defamation (excl. Advertising/broadcasting)
Incidental medical malpractice in administration of emergency aid on behalf of the Insured

32. Selected Policy Conditions
Airworthiness / comply with DGCA regulations
Issuance of tickets / waybills
Advice of material alterations
Cancellation clause
Individual contracts to be agreed by insurers
Claims notification / No admission of liability
Go through - no special comment

33. Selected Policy Conditions
Coverage
Third Party Excess AV52 coverage
Limits
excess of primary limit
Rate
US$ rate per passenger carried

34. Additional Airline Insurance Coverages
Engine Mechanical Breakdown
Profit Commission Insurance
Passenger Voluntary Settlement
Personal Accident / Loss of License
Hull “Total Loss Only”
Technical Records
Engine Mechanical Breakdown - similar to HD - rarely purchased - minimal coverage
Profit Commission Insurance - Protection of PC
Passenger Voluntary Insurance - Automatic payment
For bodily injury - set limit
PA/LOL
TLO
Tech Records

35. Additional Airline Insurance Coverages
Financial “Balance Sheet” Protection Products
Loss of Use
Loss of Profits / Extra Expenses
Grounding
Loss of Use - Fixed daily rate after franchise period
Consequential loss
Grounding

36. THANK YOU