Story ID: 
How to avoid insurance insufficiencies
By: AIN Staff
Caption: AIN 2024 Corporate Aviation Leadership Summit – Moderated by Brint Smith, ARM, First Vice President, Aviation Alliant Insurance Services, Inc.
Word Count: 1045
AIN’s 2024 Corporate Aviation Leadership Summit (CALS) East brought together a selection of business aviation thought leaders to examine and discuss some of our industry’s pressing issues. The session’s topics included Insurance, Safety, Managing Generational Differences, Metrics, Legal, Sustainability, Mental Performance (health), Maintenance, and Retention.
Business aviation as a whole is a pretty “black and white” business. From training to maintenance to FARs, all the requirements are right there in front of you. But when it comes to insurance, even the most seasoned department director is suddenly circling in a fog.
The CALS East roundtable attendees identified four areas that typically caused the most insurance insecurity: wet and dry leases, single-pilot operations, pilot age/experience, and training.
Insurance insights into wet versus dry leasing
Leasing is becoming an increasingly considered option for business aircraft, and many flight department managers struggle to understand how “wet” or “dry” leasing could impact their insurance needs.
“Our operation is considering dry leasing an aircraft,” a chief pilot says. “What do we need to know when making our final decision?”
Both have pros and cons. Today, insurers are paying more attention to dry leases, which can lead to higher premiums and a cap on the number of insurable arrangements.
Another differentiator is that if your aircraft is down because of a covered claim, you may not be reimbursed for the dry lease’s cost. In most instances, with a wet lease, the “extra expense” (for substitute) aircraft provision will provide some level of partial reimbursement for those costs.
Of course, like everything, every operator’s situation is different. Because every operator and leasing situation has its own facts and circumstances, more details should be discussed and reviewed with your insurance broker and underwriter before making a final decision.
One is the loneliest number…
One topic that received increasing interest during the CALS East roundtable was the growing trend toward single-pilot operations
“My boss asked about adding a single-pilot aircraft to our operation,” says a Part 91 pilot. “What do I need to tell him about our insurance coverage?”
While a single-pilot airplane does mitigate some of the pressing flight crew issues, these aircraft introduce some other challenges from an insurance perspective. For example, single-pilot operations are always perceived as riskier because of the lack of redundancy in the cockpit.
Also, because of those perceived risks and the higher cost of newer models, fewer insurers are interested in covering single-pilot aircraft, and those that do require higher premiums and deductibles. In addition, many carriers are capping aircraft liability limits or insured values.
Capping the value that one insurer will cover may trigger the need for operators to engage more than one insurer to complete a single insurance policy. Although not unusual for helicopter insurance buyers, these “syndicated” or quote-shared policy structures are more expensive to buy and more complex to manage.
Again, the only way to fully understand the impact of adding a single-piloted aircraft to your operation is to involve your insurance company early on in the conversation. In some instances, much higher premiums or reduced coverage risks may offset the savings from having only one pilot.
The higher costs of lower time
As one flight department manager asks, “Because of a lack of candidates, we’re considering hiring lower-time pilots. How will that impact our insurance coverage?”
That’s a tricky question because of all the variables. But, at a minimum, the flight department needs to follow some best practices, including ensuring the pilot candidate is approved by your insurance underwriter; insufficient training or experience can invalidate your insurance coverage.
Also, when hiring a contractor pilot, the best practice is to extend your insurance coverage to them so they would be defended and indemnified (additional insured) and held harmless (waiver of subrogation) if there is an accident. Another best practice is not to have a contractor act as PIC but only as SIC.
You can also help mitigate/manage training costs by requiring every new hire to complete an in-flight interview or an in-house ground/flight school to confirm their actual proficiency in your aircraft.
Asking your underwriter to allow for an exception from the simulator training requirement so you can interview them in the aircraft not only saves you money but also allows you to better determine whether you will hire the candidate.
No matter your situation, it’s best practice to work closely with your insurance underwriter and your company’s human relations department to help get these types of exceptions approved. Of course, the best time to do it is before you start the hiring process.
Yes, you can buy experience
Unfortunately, insurance companies aren’t treating “gray hairs” better these days, and that can catch the unknowing flight department off guard. In many instances, pilots aged 68 and older are required to hold a First Class Medical because of the requirement for an annual EKG.
A pilot over 65 can still be hired, approved, and insured, but it may be more expensive in the long term, and the aircraft liability limits may be lowered because fewer carriers will cover the policy. Again, the carrier may require a First Class Medical for pilots in this age category.
Many operators find it surprising (and not in a good way) that younger pilots—those with very little multi-engine or turbine/turbojet experience—also get hit with higher premiums and lower liability limits. But because of the limited number of “qualified” candidates, operators are turning to the option of bringing “less experienced” pilots on board in an effort to “grow their own”— a concept many insurance companies have experience with.
In these situations, it’s not uncommon for the insurance company to expect make-and-model simulator training and see that the flight department has a transition plan for bringing the low-time pilots up to speed in their aircraft.
The process may include extra ground school, in-aircraft training via a known provider, and a minimum number of supervised hours in the aircraft.