Interestingly, the number of U.S.-registered aircraft is increasing, while the number of pilots is decreasing. (Wikipedia says there were 609,306 licensed pilots and GAMA counted 211,000 registered aircraft.) But even allowing for flying clubs, partnerships and the graying and thinning of the pilot population, this still means that there are a lot of pilots who […]
Beginning in 2010, there was a further influx of companies starting their own aviation divisions. These included Travelers, SwissRe, QBE, Hallmark, XL Catlin, Great American and W.R. Berkley. General aviation did not grow much in that time, so by 2016 there were a lot more insurance dollars chasing each airplane and helicopter than there had been 10 years before. The market was awash in what insurers refer to as “capacity.” Capacity is basically the capital required for insurers to set aside as reserves as they take on the risk that comes with new insurance policies. As the new companies entered the market, the legacy companies, including USAIG, Global Aerospace, AIG and Old Republic (Phoenix), were forced into a defensive position in order to maintain their market share against the new invaders, and we were off to the races.
Every few years we take a close look at the U.S. general aviation insurance market. During the research we speak with underwriters and brokers to get a feeling for what changes they see, what problems they are having and what they anticipate coming down the track for those of us who write premium checks. …
When we last looked at insurance for older pilots, the insurance market was in the midst of a soft market cycle, or at least we thought it was. Almost four years later, there are even more insurers than there were then. As the GA fleet in the U.S. continues to gradually shrink, there are more insurance dollars chasing fewer airplanes. As a result, rates and underwriting guidelines are even softer now than they were then.
According to GAMA statistics, there are 611,000 active pilots in the United States and only 223,000 registered general aviation aircraft. Even allowing for air taxi airplanes, clubs and partnerships, this means that lots of us are flying airplanes that we don’t own. Some of us rent from local flight schools, some borrow from friends.
Flying is one of the fastest ways to burn money in this life. Airplanes are expensive and helicopters even more so. For most light airplane owners who fly less than 100 hours each year, owning the airplane actually costs more than operating it. And in recent years, many airplanes are depreciating much faster than they are being physically worn out. Buying the right amount of insurance to match the aircrafts value is trickier than it used to be, but is still the only way to protect an expensive investment.When deciding how much physical damage coverage to buy, there are two considerations, depending upon what happens to the airplane.
In a 2007 study going back more than 50 years, a Boeing safety group identified inflight loss of control as the number one source of airline fatalities. The 2008 Nall Report tells a similar story for general aviation. Loss of control inflight, or LOC-I in the argot of those who study aircraft accidents, includes a host of hazards ranging from garden-variety stalls to control surface hardovers and encounters with wake turbulence. LOC- I accidents happen to the spectrum of civilian pilots, from students to airline veterans. The stubbornness of LOC-I as the single largest cause of fatal accidents has a great deal to do with the way that we train. While the airlines have incorporated a number of loss-of-control scenarios in their training, general aviation hasnt really addressed the issue.
The good news about aircraft insurance is that for most owners, insurance has never been more affordable or more available. The bad news is that most people in the business think that the pendulum is about to swing back the other way. What got us here? Ironically, the 911 attacks had something to do with it as does the current economic malaise. Demand is slack, there are more providers than ever and companies are willing to deal. But, as always, it wont last. Following the 9/11 attacks, insurance rates for most aircraft increased dramatically. The amount of the increases depended upon the market segment, with many big iron operators seeing their rates double overnight. Most light aircraft owners saw less of an impact, but as a result, 2002 and 2003 were some of the most profitable years for the industry in recent history.
The long-awaited age of the VLJ has begun. The Eclipse 500 and the Cessna 510 Mustang are the vanguard of the new movement. Eclipse is now building almost one new jet airplane each work day. Cessna delivered 45 airplanes in 2007 and is ramping up to build two Mustangs a week. There are already close to 200 VLJs out there. By this time next year that number will have more than doubled, and soon other manufacturers will be swelling the ranks of Jet-A consumers. One of the looming worries for VLJ builders and potential owner-pilots is what the cost of insuring these jets will be, or if it will be available at all for budding jet pilots.
For aviation insurers, its the best of times and the worst of times. In many traditional parts of the aircraft insurance market, an overabundance of capital and new insurers is forcing premiums-especially those for corporate airplanes-down to new lows. At the same time, buyers are snapping up new airplanes of all sizes faster than manufacturers can build them. And the two new market areas of the decade, Very Light Jets and Light Sport Aircraft, are beginning to take off.In some ways, Light Sport Airplanes are an insurers dream. If the glass-half-full guys are even remotely right, there will be shoals of them. And from an underwriters viewpoint, theyre attractive because they have what insurers call “low severity.” Severity is essentially the average cost of an accident.
If you fly for fun or for a living and you have shopped for life insurance, you probably heard the agent draw a breath when he learned you were a pilot. If you fly, you pay more for life insurance. A lot more. My own experience in buying life insurance is typical. After asking my age, weight, whether I smoked and a number of other health-related questions, the agent quoted me the companys most attractive rates, with all the appropriate disclaimers.
