fuselage of old airplaneAn underwriter must look at unmanned aviation risks differently compared with manned aviation, as there are significant differences that affect the insured valuation and loss adjustment.

Commercial insurer Allianz Global Corporate & Specialty estimates that the U.S. drone insurance market could reach more than $500 million by the end of 2020. Globally, its value could approach $1 billion.

AGCS recently released the report, “Rise of the Drones: Managing the Unique Risks Associated with Unmanned Aircraft Systems,” examining the key issues and trends related to the growth in use of drones and discusses potential risk exposures related to their deployment in the private, public and
commercial realms.

As recreational and commercial drone use explodes, the following 10 risk exposures are of most concern…

2. Loss of control

AGCS sees a major risk in the loss of control because of frequency interferences as there have already been numerous such incidents, including injuries.

[Please see the article for the rest of the list.]

The primary concerns for insurers are the lack of international, regional and local regulations for the safe operation of drones, and the risks posed from sharing the same airspace as military and civil aviation operations.

In many locations, there are few or no drone maintenance standards.

In many locations, there are few or no pilot training standards.

More drone safety incidents are likely to occur once regulations are finalized that encourage more widespread drone use. The possiblity exists for multimillion dollar claims against businesses, operators and manufacturers.

Unmanned aircraft owners and operators have an exposure for the aircraft hull and liability. Manufacturers of unmanned aircraft have a products liability exposure. Businesses that sell, service, and train operators of drones have a general liability exposure.

In many locations around the world no registration of the drone is necessary, causing a problem for insurers and claimants. “However, in future, identification of both (drone) and operator will be essential for maintaining proper liability in general,” according to Brent Terwillinger of Embry-Riddle Aeronautical University.

Allianz generally sees $1 million as the most popular policy limit purchased, although it does see higher limits needed to meet contractual requirements of large corporate clients.

Interesting to see a $500M US forecast by the end of 2020. Even at $2,000 per policy for liability plus additional insured, that is a lot of drones.
Hard to imagine $1 million being sufficient for service providers with corporate clients. People I speak with seem to think $2-5M will be the norm, which is consistent with increasing limits across the board. See the following example for why even $5M may not be enough.


graphic showing hypothetical UAV insurance scenario

This loss scenario is also from Allianz. It was in an excellent article on the new Australian micro rule published by AviAssist.

read more at propertycasualty360.com

read more at aviassist.com

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