Aviation UnderwritingAviation Underwriting

Aviation Insurance ProgrammeAviation Insurance Programme

PresentationBy

Vijay Thakur(Deccan Insurance Services )

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.

Aviation History

Main Airline Insurance CoveragesMain Airline Insurance Coverages Hull “All Risks”Hull “All Risks”

Hull “War Risks”Hull “War Risks”

Spares “All Risks” / “War Risks”Spares “All Risks” / “War Risks”

Aircraft Liabilities Aircraft Liabilities

– Third PartyThird Party

– PassengerPassenger

– BaggageBaggage

– Cargo and MailCargo and Mail

Excess Liability - Third Party War RisksExcess Liability - Third Party War Risks

Hull DeductibleHull Deductible

Aerospace Manufacturers Products & Grounding LiabilityAerospace Manufacturers Products & Grounding Liability

Airport Owners & Operators LiabilityAirport Owners & Operators Liability

Product LiabilityProduct Liability

Hull All RisksHull All Risks CoverageCoverage

– Covers all risks of loss of or damage to aircraft unless otherwise Covers all risks of loss of or damage to aircraft unless otherwise excludedexcluded

– Covers flight and ground risksCovers flight and ground risks– Coverage includes ingestion / Foreign Object Damage (F.O.D.) Coverage includes ingestion / Foreign Object Damage (F.O.D.)

caused by a single recorded incidentcaused by a single recorded incident

Main ExclusionsMain Exclusions– Mechanical Breakdown / Wear and TearMechanical Breakdown / Wear and Tear– War, Hi-jacking and Other Perils Exclusion Clause AVN 48BWar, Hi-jacking and Other Perils Exclusion Clause AVN 48B– Nuclear Risks Exclusion Clause AVN 38BNuclear Risks Exclusion Clause AVN 38B– Items detached from aircraft and held as spare partsItems detached from aircraft and held as spare parts– Loss of UseLoss of Use

Hull All RisksHull All Risks LimitsLimits

– Total Loss / Constructive / Arranged Total Loss:- Pay agreed Total Loss / Constructive / Arranged Total Loss:- Pay agreed value as declared by airline and agreed by insurers for each value as declared by airline and agreed by insurers for each aircraftaircraft

– Partial losses pay for cost of repairs less deductiblePartial losses pay for cost of repairs less deductible– Deductible is also applied to TL/CTL claims of on Rotor Wing Deductible is also applied to TL/CTL claims of on Rotor Wing

AircraftAircraft DeductibleDeductible

– Jets wide-bodied US$1,000,000Jets wide-bodied US$1,000,000– Hybrid US$750,000Hybrid US$750,000– Narrow bodied US$500,000Narrow bodied US$500,000– Standard market deductibles may be increased in the futureStandard market deductibles may be increased in the future– Separate deductible insurance may be arranged to “buy down” Separate deductible insurance may be arranged to “buy down”

to a lower levelto a lower level

Hull All RisksHull All Risks Additional Provisions:-Additional Provisions:-

– Missing aircraftMissing aircraft

– Forced landing, salvage charges and expensesForced landing, salvage charges and expenses

– Cost of repairsCost of repairs

– Loss payee provisions (leased / financed aircraft)Loss payee provisions (leased / financed aircraft)

– Leased components with Stipulated Loss ValueLeased components with Stipulated Loss Value

– Supplementary ExpensesSupplementary Expenses

Search & Rescue Operations, RunwaySearch & Rescue Operations, Runway Foaming Foaming

Hull War and Allied PerilsHull War and Allied Perils CoverageCoverage

– Covers loss of or damage to aircraft by War and Allied Covers loss of or damage to aircraft by War and Allied Perils as excluded from All Risks policy such as War / Perils as excluded from All Risks policy such as War / Civil War etc. Act of Terrorist, Strike / Riot, Civil Civil War etc. Act of Terrorist, Strike / Riot, Civil Commotion, Confiscation etc., HijackingCommotion, Confiscation etc., Hijacking

– Standard market wording - LSW 555B / LSW 555CStandard market wording - LSW 555B / LSW 555C Main exclusionsMain exclusions

– Hostile detonation of nuclear weapon.Hostile detonation of nuclear weapon.– War between UK, USA, France, Russian Federation, War between UK, USA, France, Russian Federation,

ChinaChina– Confiscation etc. by government of registrationConfiscation etc. by government of registration– Confiscation etc. for financial reasons.Confiscation etc. for financial reasons.– Repossession by title holderRepossession by title holder– Delay, loss of use, consequential lossDelay, loss of use, consequential loss

Hull War and Allied PerilsHull War and Allied Perils

LimitsLimits

– Each aircraft covered for the same agreed value as Each aircraft covered for the same agreed value as under the hull all risks policy subject to a policy under the hull all risks policy subject to a policy aggregate sum insured per annumaggregate sum insured per annum

DeductibleDeductible

– No deductibleNo deductible Additional Provisions:-Additional Provisions:-

– Extortion and Hijack Expenses (90% of payments Extortion and Hijack Expenses (90% of payments properly made)properly made)

– Leased components with Stipulated Loss ValuesLeased components with Stipulated Loss Values

Hull War and Allied PerilsHull War and Allied Perils Cancellation, Revision and Automatic Termination Provisions:-Cancellation, Revision and Automatic Termination Provisions:-

– Insurers may issue 7 days notice to review premium and/or Insurers may issue 7 days notice to review premium and/or geographical limits at any timegeographical limits at any time

– Automatic review of premium and/or geographical limits on expiry Automatic review of premium and/or geographical limits on expiry of 7 days from hostile detonation of nuclear weaponof 7 days from hostile detonation of nuclear weapon

– Insured or insurers may cancel policy by giving 7 days notice Insured or insurers may cancel policy by giving 7 days notice prior to the end of each policy quarterprior to the end of each policy quarter

– Automatic policy cancellation in the event of war between UK, Automatic policy cancellation in the event of war between UK, USA, France, Russian Federation, China (if aircraft are in the air, USA, France, Russian Federation, China (if aircraft are in the air, coverage continues until first landing)coverage continues until first landing)

Spares All RisksSpares All Risks

CoverageCoverage

– Covers all risks of loss or damage to spare aircraft Covers all risks of loss or damage to spare aircraft engines, parts or equipment owned by the Assured or engines, parts or equipment owned by the Assured or for which they are responsiblefor which they are responsible

– Covers whilst in storage or in transitCovers whilst in storage or in transit

– Covers Ground EquipmentsCovers Ground Equipments

– Covers EnginesCovers Engines

Spares All RisksSpares All Risks Main ExclusionsMain Exclusions

– Mechanical / electrical breakdown, wear and tear.Mechanical / electrical breakdown, wear and tear.

– War, Hi-jacking and Other Perils Exclusion Clause (AVN War, Hi-jacking and Other Perils Exclusion Clause (AVN 48B) (may buy-back cover normally in conjunction with 48B) (may buy-back cover normally in conjunction with hull war)hull war)

– Nuclear Risks Exclusion Clause AVN38B Nuclear Risks Exclusion Clause AVN38B

– Inventory lossesInventory losses

– Loss arising under process and directly resulting Loss arising under process and directly resulting therefromtherefrom

– Any spare whilst fitted to an aircraftAny spare whilst fitted to an aircraft

Spares All RisksSpares All Risks

LimitsLimits

– Normally insured on a replacement value basis Normally insured on a replacement value basis up to value declared - will pay cost of repair in up to value declared - will pay cost of repair in event of partial loss (less deductible). Subject to event of partial loss (less deductible). Subject to a limit per occurrence and a sub-limit for any one a limit per occurrence and a sub-limit for any one transittransit

DeductibleDeductible

– US$ 10,000 each claim, but for engine US$ 10,000 each claim, but for engine running/testing losses the hull all risks deductible running/testing losses the hull all risks deductible appliesapplies

Spares War and Allied PerilsSpares War and Allied Perils

Usually arranged in conjunction with hull warUsually arranged in conjunction with hull war

Coverage for paragraph (a) of LSW 555B limited to Coverage for paragraph (a) of LSW 555B limited to transit risks onlytransit risks only

Legal LiabilityLegal Liability CoverageCoverage

– Will indemnify against legal liability for bodily injury or Will indemnify against legal liability for bodily injury or property damage suffered by third parties (including property damage suffered by third parties (including passengers baggage and cargo) arising from the aviation passengers baggage and cargo) arising from the aviation operations of the airline and caused by an occurrenceoperations of the airline and caused by an occurrence

– Relates mainly toRelates mainly to

Operation of aircraftOperation of aircraft

Injury to passengersInjury to passengers

Damage to cargo / baggageDamage to cargo / baggage

Operations at airports and other aviation premisesOperations at airports and other aviation premises

Services to other airlinesServices to other airlines

Can include war and allied perils “Writeback” per AVN Can include war and allied perils “Writeback” per AVN 52D52D

Legal LiabilityLegal Liability Non-Aviation Liability Clause AVN59 defines extent of Non-Aviation Liability Clause AVN59 defines extent of

aviation liability:-aviation liability:-– Occurrences involving aircraft or parts or equipmentOccurrences involving aircraft or parts or equipment– Occurrences arising at airport locationsOccurrences arising at airport locations– Occurrences arising at any other location in connection with the Occurrences arising at any other location in connection with the

Insured’s business of transporting passengers or goods by airInsured’s business of transporting passengers or goods by air– Occurrences arising out of the supply of goods or services to Occurrences arising out of the supply of goods or services to

others:-others:- in connection with the use and/or operation of aircraftin connection with the use and/or operation of aircraft involved in the air transport industryinvolved in the air transport industry

Subject to policy conditions and exclusionsSubject to policy conditions and exclusions

Legal LiabilityLegal Liability Main exclusionsMain exclusions

– "Non-Aviation" risks e.g. Employers Liability / Motor liability"Non-Aviation" risks e.g. Employers Liability / Motor liability

– Damage to property owned, leased or rented by the assuredDamage to property owned, leased or rented by the assured

– Nuclear risks (AVN38B)Nuclear risks (AVN38B)

– Noise, pollution, contamination, electrical interference Noise, pollution, contamination, electrical interference (AVN46B).(AVN46B).

– Hostile detonation of nuclear weapon (Article (b) of Hostile detonation of nuclear weapon (Article (b) of AVN48B).AVN48B).

– Other exclusions per AVS.104BOther exclusions per AVS.104B

Legal LiabilityLegal Liability

LimitsLimits– Will pay damages assessed against the assured Will pay damages assessed against the assured

subject to a limit any one occurrence. Plus legal fees subject to a limit any one occurrence. Plus legal fees and expensesand expenses

– AVN52D limits third party war liability coverage to AVN52D limits third party war liability coverage to USD 50,000,000 each occurrence and in the annual USD 50,000,000 each occurrence and in the annual aggregateaggregate

DeductibleDeductible– Baggage US$1,250Baggage US$1,250 Standard Market Standard Market – Cargo / Mail US$10,000Cargo / Mail US$10,000 DeductiblesDeductibles

Legal LiabilitiesLegal Liabilities

RatingRating

– Departure rate plus per passenger carried basisDeparture rate plus per passenger carried basis

– US$ amount per 1,000 RPK’sUS$ amount per 1,000 RPK’s

– Smaller risks Third Party Legal Liability (TPLL) Smaller risks Third Party Legal Liability (TPLL) US$ per aircraft plus Passenger Legal Liability US$ per aircraft plus Passenger Legal Liability (PLL) US$ per passenger seat(PLL) US$ per passenger seat

– Following 11/09/2001, “Special Surcharge” of Following 11/09/2001, “Special Surcharge” of USD 1.25 per passenger introduced for all USD 1.25 per passenger introduced for all airlinesairlines

Additional Provisions:-Additional Provisions:-

– Funeral, medical, illness, transportation and Funeral, medical, illness, transportation and repatriation expensesrepatriation expenses

– Public enquiry, removal of wreck, search and rescue, Public enquiry, removal of wreck, search and rescue, runway foaming expensesrunway foaming expenses

– Defence, settlement and supplementary paymentsDefence, settlement and supplementary payments

Legal LiabilityLegal Liability

Legal LiabilityLegal Liability

Additional Provisions:-Additional Provisions:-

– Excess “Non Aviation” LiabilityExcess “Non Aviation” Liability Sum insured US$ 25,000,000 any one occurrence and in Sum insured US$ 25,000,000 any one occurrence and in

the annual aggregate, in excess of underlying insurancethe annual aggregate, in excess of underlying insurance

– Personal Liability (per AVN60)Personal Liability (per AVN60) Sum insured US$ 25,000,000 any one offence and in the Sum insured US$ 25,000,000 any one offence and in the

annual aggregateannual aggregate

Selected Policy ConditionsSelected Policy Conditions Airworthiness / comply with DGCA regulationsAirworthiness / comply with DGCA regulations

Issuance of tickets / waybillsIssuance of tickets / waybills

Advice of material alterationsAdvice of material alterations

Cancellation clauseCancellation clause

Individual contracts to be agreed by insurersIndividual contracts to be agreed by insurers

Claims notification / No admission of liabilityClaims notification / No admission of liability

Selected Policy ConditionsSelected Policy Conditions

CoverageCoverage– Third Party Excess AV52 coverageThird Party Excess AV52 coverage

LimitsLimits– excess of primary limitexcess of primary limit

RateRate– US$ rate per passenger carriedUS$ rate per passenger carried

Additional Airline Insurance Additional Airline Insurance CoveragesCoverages

Engine Mechanical BreakdownEngine Mechanical Breakdown

Profit Commission InsuranceProfit Commission Insurance

Passenger Voluntary SettlementPassenger Voluntary Settlement

Personal Accident / Loss of LicensePersonal Accident / Loss of License

Hull “Total Loss Only”Hull “Total Loss Only”

Technical RecordsTechnical Records

Additional Airline Insurance Additional Airline Insurance CoveragesCoverages

Financial “Balance Sheet” Protection ProductsFinancial “Balance Sheet” Protection Products

– Loss of UseLoss of Use

– Loss of Profits / Extra ExpensesLoss of Profits / Extra Expenses

– GroundingGrounding

THANK YOU