Aviation industry insurance provider USAIG is celebrating its 90th anniversary this year. The company was founded in 1928 by Reed Chambers and David Beebe, two former World War I aviators who saw the requirement for an insurance company that fully understood the needs of aviation. That July, they established the United States Aircraft Insurance Group, along with United States Aviation Underwriters (USAU), which remain intact nine decades later, generating the capacity to cover any size aviation or aerospace exposure.
When asked about the company’s durability, CEO John Brogan, who assumed that role last April after the retirement of David McKay, said it goes back to the very beginning of the company and the plans of its founders. “Since they could not find one insurance company that wanted to insure an aviation risk, they went out and found several companies that would share in the risk,” he told AIN. Those companies formed a pool known as USAIG, which is managed by USAU, and the structure remains the same, even if the specific insurers have changed. Today, that line up of insurance companies includes Chubb, Liberty Mutual, General Re Insurance and National Indemnity.
“The pool set up is really the secret to the longevity, because at any one time, any one company can decide 'aviation is too risky for us, we don’t want to insure it any more,' or they could go out of business and go away, and the pool still exists,” explained Brogan. “The company could never come or go at the whim of one executive or one company making a decision that they liked or disliked aviation.”
USAIG insures a wide swath of the industry, from gliders to satellite-launching rockets. “Starting in 1928, aviation was very young then, so if it’s flown, we’ve likely insured it," said Brogan. “Since helicopters have been flying in the U.S., we’ve been insuring them.” He estimates rotorcraft currently make up 10 percent of the company’s business.
Through the company's Performance Vector safety initiative, rotorcraft policyholders who participate in the program can receive training subsidies in the form of USAIG “Safety Bucks” to spend on simulator-based pilot or maintenance technician training at vetted providers. Since the program’s establishment in 1997, the company has awarded more than $6 million in training subsidies. To qualify for the program, an operator must have at least one turbine-powered aircraft on its policy.
Brogan noted that after an initial spike in aviation insurance premium costs following the 9/11 terror attacks, more insurers entered the market, leading to as many as four times the number there were before 2001. That influx and competition sparked a steady decline in premiums, which has caused an imbalance of late as premiums have not kept pace with aircraft prices. “The values of the helicopters have gotten much larger than they ever were before, especially in the offshore sector,” he noted. “You look at an S-92 or Super Puma and we’re talking $30 million ships, which was unheard of when I started in the helicopter world, and because these ships are so much bigger, they are carrying so many more people, which leads to a lot more liability as well.”
As most insurers carry diverse risk portfolios, given the spate of recent disasters, from the stream of hurricanes last fall to earthquakes in Mexico, to the damage caused by the enormous wildfires in California, Brogan expects that trend of declining aviation insurance rates to come to an end, as insurers contend with the losses they have experienced.
Aviation industry insurance provider USAIG is celebrating its 90th anniversary on July 1. The company was founded in 1928 by Reed Chambers and David Beebe, two former World War I aviators who saw the requirement for an insurance company that fully understood the needs of aviation. That year, they established the United States Aircraft Insurance Group, along with United States Aviation Underwriters (USAU) to manage it, which both remain intact nine decades later, generating the capacity to cover any size aviation or aerospace exposure.
Asked about the secrets to the company’s longevity, CEO John Brogan, said it goes back to the very beginning of the company and the plans of its founders. “Since they could not find one insurance company that wanted to insure an aviation risk, they went out and found several companies that would share in the risk,” he told AIN. Those companies formed a pool known as USAIG, which is managed by USAU, and the structure remains the same, even if the specific insurers have changed. Today, that line-up of insurance companies includes Chubb, Liberty Mutual, General Re Insurance, and National Indemnity. “The pool set up is really the secret to the longevity, because at any one time, any one company can decide aviation is too risky for us, we don’t want to insure it any more, or they could go out of business and go away, and the pool still exists,” explained Brogan. “The company could never come or go at the whim of one executive or one company making a decision that they liked or disliked aviation.”
USAIG insures a wide swath of the aviation industry, from gliders to satellite-launching rockets. “Aviation was very young [when the company started in 1928], so if it’s flown, we’ve likely insured it," said Brogan. In 1937, the group handled all claims involving U.S. citizens in the fiery destruction of the German airship Hindenburg in Lakehurst, New Jersey; in 1952 it provided coverage for the prototype Boeing 707, which ushered in the modern commercial flight era; in 1969 it issued product liability coverage for Grumman’s Lunar Excursion Module; and in 1977 it handled all claims resulting from the collision of two 747s in Tenerife, Canary Islands, the worst disaster in aviation history.
The following year, USAIG celebrated its 50th anniversary and for the first time expanded its coverage to the owners and operators of general aviation aircraft. The group’s portfolio is largely U.S.-based, but it maintains a separate company, CAIG (launched in 1937), that handles the company’s international coverage, which totals approximately 5 percent of its business.
In 1984, the company spearheaded a safe fueling program for the general aviation industry by reimbursing its customers for the costs of installing jet fuel lockout devices. “Historically, we’ve been very big in safety initiatives," said Brogan, citing the company’s Performance Vector program which debuted in 2011. “What we do with that program is we subsidize certain safety initiatives for our policy holders to participate in.” In 2013, it introduced an enhanced version of the program, which refunds a significant portion of premiums to business aviation operators who avoid losses while meeting safety standards.
Brogan noted that after an initial spike in aviation insurance premium costs following the 9/11 terror attacks, more insurers—attracted by the high rates—entered the market, leading to as many as four times the number there were before 2001. That influx and competition sparked a steady decline in premiums, which has caused an imbalance of late, as premiums have not kept pace with aircraft prices. “Liability verdicts from juries are bigger; the cost to fix airplanes has gone up; labor, parts, all of that has been on the rise,” said Brogan.
All the insurers in the pool carry diverse risk portfolios, and given the spate of recent disasters over the past year, from hurricanes, to earthquakes, to wildfires, Brogan expects that trend of declining aviation insurance rates to come to an end, as insurers digest the losses they have experienced.