Page 15 - November 2022

The taxes from FIGA are pooled together to provide some relief to those suffering a financial loss that may not be remedied otherwise. The aviation insurance industry is attempting to self-adapt so they don’t end up in dire straits and at the mercy of state sponsored facilities like FIGA. You can learn more about FIGA at www.figafacts.com.
Insurance companies are, like most companies, in the business to make money. If they aren’t making money in a particular industry segment, they leave it. For example, about 15 years ago you may remember the insurance carrier Travelers. It came to the aircraft insurance market and took on risk for a fraction of the price of its competitors. Unsurprisingly, they were taking on significant risk for inadequate premium, and pulled out of the aviation segment after about 18 months. The roller coaster of rates is not conducive to an owner trying to manage annual operating budgets.
Most of the day-to-day claims in the aviation market segment are measured in the thousands to tens-of-
thousands of dollars. However, a “bell ringer” of a loss that ends up in the tens or hundreds of millions of dollars could cause a carrier to leave the aviation sector entirely. Many of the ultra-high-end net worth business jet owners and Fortune 500 companies have at least $500,000,000 of coverage. A major accident that results in loss of life and an additional $70,000,000 business jet, definitely classifies as a “bell ringer.” As the aviation insurance carriers take a step back and evaluate their portfolios, they are becoming more strategic in managing the risk they assume. This strategy isn’t necessarily new; the airlines have structured their coverage this way for years. It is commonly referred to as a “quota-share” placement. This means multiple carriers participate on one policy with a defined percentage of the risk. With large jury awards becoming more common and increasing costs of aircraft hulls, we are seeing more aircraft insurance companies evolving and making quota-share placements in the general aviation sector more commonplace.
In a perfect scenario, 10 carriers would each assume 10% of the global aircraft market. This would mean each
NOVEMBER 2022
KING AIR MAGAZINE • 13