Tag Archives: aviation insurance

New Perils Arise
as Air Travel Resumes

Among the many things we’ve missed since the start of the pandemic, travel has been one of the most notable. Whether for business, to visit distant family members, or just get away from our now-too-familiar surroundings, many of us have been keenly anticipating a return to air travel.

Flying is among the safest activities people can engage in (see infographic). But new concerns are being raised about risks emerging in a post-COVID-19 world.

The risks highlighted in a recent report from Allianz Global Corporate & Specialty (AGCS) include “rusty” pilots, “air rage”, new aircraft, and even insect infestations.

The industry is slowly rebounding, and AGCS notes that the airline teams have stepped up to ensure that air travel remained safe, despite layoffs, financial struggles, and the pressures attending an overnight shift to remote working.

“But as more aircraft return to the skies,” the report says, “there has been much discussion about the hazards that may arise from such an unprecedented period, as well as some of the changes the sector will see.”

Earlier this year it was reported that dozens of pilots had notified the Aviation Safety Reporting System about making mistakes after climbing back into the cockpit. Operated by NASA, the Federal Aviation Administration (FAA) watchdog system enables pilots and crew members to anonymously report mechanical glitches and human errors.

“Many of the pilots cited ‘rustiness’ as a reason for the incidents after returning to the skies following months of lockdown,” AGCS reports. “While there have been no reported incidents of out‑of‑practice pilots causing accidents injuring passengers, mistakes reported included: forgetting to disengage the parking brake on takeoff, taking three attempts to land the plane on a windy day, choosing the wrong runway, and forgetting to turn on the anti‑icing mechanism that prevents the altitude and airspeed sensors from freezing.”

Condition of aircraft

At the peak of the first wave of the crisis, airlines parked around two thirds of the total global fleet. More than a year later, many are still mothballed.

“This unprecedented situation has resulted in a host of new challenges,” AGCS writes. “Loss exposures do not just disappear when airplanes are parked.”

Rather, the risks and their costs change. AGCS cites fears of damage among grounded aircraft during thunderstorms in Texas that pelted the region with golf ball‑sized hail.

Aircraft are large and tricky to maneuver on the ground, and ground incidents can result in costly claims. When operators transferred fleets from the runways to storage facilities at the start of the pandemic there were a number of collisions. It would not be surprising, therefore, to see more such incidents as planes are moved in preparation for reuse.

The European Union Aviation Safety Agency has reported  “an alarming trend…of unreliable speed and altitude indications” related to accumulations of foreign objects, such as insect nests in areas of aircraft that provide flight-critical air data information.

“This has led to a number of rejected take-off and in-flight turn back events,” the agency reports.

On the other hand, as many airlines have retired larger aircraft earlier than planned due to COVID-19, there will be many newer planes on the runways and in the air, which presents its own challenges from an insurance coverage perspective. As we’ve written previously, more modern planes are more expensive to repair or replace when there is an incident, leading to more expensive claims.

Air rage on the rise

In May 2021, an attendant on a Southwest Airlines flight attendant had two teeth knocked out after an altercation with a passenger over wearing a mask – the latest in a spate of highly publicized incidents that moved the FAA to issue a warning about a spike in unruly or dangerous behavior. More recently, an American Airlines flight to the Bahamas was canceled when some among a group of high school students refused to wear masks.

In a typical year in the United States, there tend to be no more than 150 reports of serious onboard disruption, the AGCS report says – but by June 2021 that number had already reached about 3,000, including about 2,300 involving passengers who refused to comply with the federal mandate to wear a mask while traveling.

Few COVID-19 claims

The aviation industry has seen few claims directly related to the pandemic to date, AGCS says, also noting a decline in slip-and-fall and lost-baggage claims at airports because of the reduced number of passengers during the pandemic. Such claims are expected to return to more typical levels as people resume traveling, and insurers will need to be mindful of new hazards that could affect claims experience.

Aon: Airline Insurance Market Rates Continue To Decline

Rates in the airline insurance market continue to decline, despite rising exposures (average fleet values and passenger number forecasts), according to Aon’s Q3 2012 market update.

Aon reports that a high level of capacity continues to drive the soft market conditions, with healthy competition for attractive risks.

The low level of claims in 2011 and so far in 2012 is another key factor.

Including an estimate for minor losses, Aon says total claims for 2012 so far are 40 percent lower than the 1995-2011 average and 60 percent lower than the five year average.

By the numbers this puts the current overall loss figure so far this year at $426.6 million, compared to $466.7 million at the same point in 2011.

Aon comments:

Last year’s loss figures at this point in the year were also at a historic low, meaning that overall claims figures so far for 2012 are extremely positive.”

Adding:

It should be pointed out that the airline industry will always represent a considerable risk and that a single claim or string of claims can instantly change these statistics.”

Despite the soft market conditions, Aon says aviation underwriters remain highly selective of the risks they support.

Check out I.I.I. facts and stats on aviation.

Iceland Volcano Highlights Risk

Spare a thought for the tens of thousands of passengers (including I.I.I. president Dr. Robert Hartwig) stranded at airports across Europe as the continued eruption of a volcano beneath Iceland’s Eyjafjallajokull glacier grounded thousands of flights for the second consecutive day. According to an Associated Press report, Eurocontrol, the European air traffic agency, said half a dozen European nations have closed their airspaces and 60 percent of European flights would not operate with delays continuing into Saturday. Only 11,000 of the 28,000 flights on an average day were expected to take place Friday in European airspace, while about 100 trans-Atlantic flights arrived of the 300 typically expected. As for insurance implications, in a Reuters report via InsuranceJournal.com, several European reinsurers noted that the airlines typically are not insured  against cancellations. In an article at  BusinessWeek.com  several insurers  state that  business interruption policies for airlines and airports would be triggered only if there is physical damage to equipment. An online article at National Underwriter quotes Gordon Woo at Risk Management Solutions saying that payouts from Iceland’s national natural catastrophe fund could follow if there is property damage. Aside from the significant travel disruption, the event highlights the point that even though many volcanoes with the potential to erupt are located where they can cause major damage and losses, the volcanic threat appears to attract little attention relative to other natural hazards. According to the 2009 Hazard and Risk Science Review from Aon Benfield and Partner Re research on the impacts of volcanic eruptions continues to grow. It’s worth noting that here in the United States volcanic eruption is a covered cause of loss under homeowners and business insurance policies. Check out State Farm’s info on insurance and volcano damage on what is and isn’t covered. Check out I.I.I. facts and stats on volcanoes.