The insurance pain for the rotorcraft industry—and aviation in general—is likely to continue for at least another year or two, according to David Watkins, regional manager of general aviation for Allianz.
“Premiums are on the rise," he said during a recent webinar hosted by Helicopter Association International (HAI). "We’re 18 months into a hard market” for aviation insurance, circumstances not seen since 9/11. While aviation insurance, at $4 billion to $5 billion per year, represents a relatively minuscule portion of the $800 billion annual insurance marketplace, the Boeing Max accidents and groundings and recent large awards for several fixed- and rotary-wing accidents resulted in big losses. Liabilities associated with the Max already exceed $4.75 billion. Aviation insurance is currently unprofitable, reinsurance is harder to acquire, and brokers are scrambling to find multiple insurance companies to share client coverage for anything much above $5 million.
Since 2019, the aviation insurance industry has sustained 24 major losses above normal, and reserves are now depleted, according to Kevin Kovarik, an underwriter for USAIG who also participated in the webinar. And approximately one-quarter of those accidents involved rotorcraft.
Despite these factors, operators can use strategies to maintain their insurability and get the best possible rate. “Make a personal relationship with your underwriter,” counseled webinar panelist Joel Heining, a broker with Colorado-based AssuredPartners Aerospace. “And if the relationship isn’t there, make a change.” Heining said broker familiarity and trust in operator safety factor large in a successful relationship.
“There’s simply no replacement for a face-to-face interaction,” said fellow webinar participant Colin Bruno, senior v-p and underwriter for Global Aerospace. Bruno advised operators to begin preparing for a policy renewal months in advance because "time is critical.”
Watkins agreed. “Brokers need time to assemble a panel of insurers. What took weeks now takes months.” Watkins said brokers “are looking to get a feel for your operation” and examine key elements of the business, including its mission statement, safety culture, safety management system (SMS), and emergency response plan. “It’s about selling your business to the insurers and it’s about training.”
“Training is more of an issue in a hard market,” including simulator, scenario-based, and recovery from inadvertent entry into instrument meteorological conditions (IIMC) training, said Kovarik. “You should want to tell your broker about the type of training you do. We have to explain why we put our money behind certain risks. We like to see a third-party set of eyes on your organization. In a hard market, you want to load your hat with as many of these factors as you can.” And that includes comprehensive training and transition plans for new pilots.
Watkins agreed, touting the value of SMS and flight operations quality assurance (FOQA) programs to the insured.
Other items that factor into insurability and rates include aircraft hull value, age, make, model, and time. However, Watkins said that having an IFR-capable helicopter is of little help unless the pilots flying it have instrument currency; and he noted that certain types of operations with higher liability exposure will always be price-disadvantaged.
“High hull value coupled with single-pilot operations is something we are worried about,” said Bruno. Those types of operations typically need multiple underwriters to distribute the risk, he added.
These are the kinds of scenarios that can benefit most from a close broker relationship, said Kovarik, who related the case of a low-time pilot customer engaged in a “challenging” operation who was initially declined, only to get coverage after a sit-down in which he was given the opportunity to fully explain his operation’s safety culture and training.
Watkins cautioned that during the past soft market, simply joining an organization that focuses on industry safety and provides accreditation such as TOPS—the Tour Operators Program of Safety—did not always produce tangible economic benefit due to pricing pressures and still might not unless an operator can show a compelling application to operations.
“While it is important that you are taking part in those organizations," he said, "it is going to be important that you show why you are a part of those organizations, and what you gather from them and bring back and implement into your day-to-day operation. Simply joining some of these organizations isn’t going to trickle down into your day-to-day flight department.”
Heining said any direct insurability or rate benefit an operator would accrue from such programs would not likely arrive “until the back end of this hard market.”