aviation and transport insurance

8/9/2019 Aviation and Transport Insurance

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Aviation and Inland TransportInsurance

Prof Mahesh Kumar

Amity Business School

[email protected]



Aviation Insurance-History and Features Introduced in the early years of 20th century with

first policy being written by Lloyd¶s of London in1911.

Aviation insurance has gained significance with thebooming of aviation sector.

Aviation insurance is highly specialized and isunderwritten by relatively small number of insurance organizations on account of itscatastrophic nature of the losses.

Most airlines arrange for µfleet policies¶ to cover allaircraft they own or operate.

In India major chunk of business is owned by GIC



Aviation RisksFollowing are the types of risks involved in aviationtransport:

a) Loss or damage to the aircraft due to fire, collapse,theft, vandalism or any other peril.

b) Legal liability to third party and passengers.c) Legal liability for freight, mail, baggage etc. carried.d) Personal accident risk to the pilots, crew members and

the ground staff.e) Loss of professional license of pilots and other crew

members.Thus aviation insurance provides for physical damagecoverage i.e. damage to the aircraft and liabilitycoverage for property damage and bodily injury arisingout of ownership or use of insured aircraft.



Physical CoverageGenerally three types of insuring agreements forphysical damage to the aircraft:

a)a) µAll µAll risks¶ risks¶ basisbasis :: All physical damage losses to theaircraft, including disappearance, are covered except

those losses excluded.b)b) µAll µAll risks¶ risks¶ basisbasis ,, notnot inin flightflight:: The aircraft is covered

on µall risk¶ basis only when it is on the ground andnot in flight. Fire or explosion after a crash is notcovered.

c)c) µAll µAll risk¶ risk¶ basisbasis ,, notnot inin motionmotion:: The aircraft is coveredon µall risk¶ basis only when it is standing still. Fire orexplosion after a crash is not covered.



Liability Coverage Pays for bodily injury or property damage

arising out of the insured¶s ownership,maintenance or use of insured aircraft. Also

includes for bodily injury arising out of thepremises where the aircraft is parked.

Excluded losses include liability assumed incontract, worker¶s compensation and damageto the property under insured¶s care, custody

and control, damage or injury from noise suchas sonic boom, interference with quietenjoyment of property and pollution losses.



Aviation insurance policies in

Indiaa) Aircraft Comprehensive Insurance policy: Covers a)

loss or damage to the aircraft b) legal liability tothird party and passengers c) legal liability forfreight, mail, baggage etc. carried d) personal

accident risk to the pilots, crew members and theground staff e) Loss of professional license of pilotsand other crew members.

b) Airline Insurance ( Hull and Liability): The hull policycovers loss and accidental damage (including due toemergency landing) to air and ground risks; theliability policy covers the airline against legal actionfrom third parties or customers in respect of death,injury or physical damage to the property.



Aviation Insurance Policies in Indiac) Airline Insurance (Hull War): covers for loss of or

damage to their property (aircraft and spares ) arisingdue to war or war related activities including a) warinvasion, hostilities, civil war, rebellion, attempted

coup etc. b) strikes, riots, civil commotion or labordisturbances c) Sabotage d) Hijacking or seizure of control e) acts for political or terrorist purposes f)confiscation, naturalization, detention etc for the use of any government or public authority.

d) Product Liability: liability arising due out of thedefective design or manufacture of an aircraft product

e) General Aviation: insurance of all aircraft all aircraftother than commercial and military aircraft capable of carrying less than 40 passengers.



Aviation Insurance ±Challenges and Road

Ahead High premiums due to huge risk involved is a

major impediment in the growth of aviationinsurance.

Insurance companies have been posting losesin aviation business on account of a) the costof repairs have increased manifold b) thenumber of insured accidents is up c) the valueof aircraft is soaring.

Road Ahead: a) Self insurance b) Matching

equipment to needs c) Optimize maintenancecost d) Promote revenues e) promote personalaviation f) Focus on safety.



Transport Insurance Transport insurance deals with risk involved in

transport of goods by air, land or water.

Risks involved include that

a) Goods may be lost.

b) Goods may be damaged.

c) Goods may be delayed.

The goods can be protected by ocean marine

contracts or inland marine contracts.



Definition & Scope of Transport Insurance

Ocean marine insurance provides protection forgoods transported over water. All types of ocean going vessels and cargo together with

liability of ship owners and cargo owners canalso be insured.

Inland marine insurance provides protection forgoods shipped on land. It includes insurance onimports and exports, domestic shipments, and

means of transportation such as bridges andtunnels. They are also used to insure fine art, jewelry and other valuable goods.



Major categories of Inland Marine InsuranceInland marine contracts can be categorizedas:

a) Domestic goods in transit.

b) Property held by bailees.

c) Mobile equipment and property.

d) Property of certain dealers.

e) Means of transportation and communication.



Domestic Goods in Transit

Domestic goods may be shipped by a commoncarrier such as trucking company, railroad orairline or by company¶s own trucks face therisk of being damaged from fire, lightning,

flood, earthquake or other perils. They can alsobe damaged from the collision, derailment oroverturn of the transportation vehicle. Theselosses are covered under inland marine policy.

Exceptions being losses due to acts of God

(such as lightning), acts of public authority,acts of public enemies (war), improperpackaging by the shipper and inherent vice.



Property Held by Bailees Bailee is someone who has temporary

possession of property that belongs to another.Ex. Dry cleaner, tailors, laundries, watch repair

shop etc. Inland marine insurance also insures goods

and property held by a bailee.



Mobile Equipment and Property Inland marine property floaters used to cover

property that is frequently moved from onelocation to another such as a tractor, crane,

bulldozers, plumbing, heating or airconditioning equipments can be covered whilebeing transported to a job site or while beinginstalled.

A property floater policy is also used to insureother types of property such as fine art,livestock, theatrical property, computers andsignage.



Property of CertainD

ealers These specialized inland marine policies or

inland marine µblock¶ policies are used to insurethe property of jewelers, furriers and dealers in

diamonds, fine art, antiques or such valuablegoods.



Means of Transport and Communication Means of transportation refers to property at a

fixed location that is used in transportation andcommunication.

Inland marine insurance can be used to cover

bridges, tunnels, pipelines, power transmissionlines, radio and television towers, outdoorcranes and similar equipments for loading,unloading or transporting.

Examples: Bridge being damaged due to

floods, a fire in the tunnel when the gasolinetruck overturns and explodes, a television orpower line being blown away by wind etc.

aviation and transport insurance

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