The aviation sector produces some of the highest value and high-profile claims across the corporate insurance sector around the world.
According to the Airlines Market Renewal Outlook by McKinsey, analysing more than 32,000 industry claims from 2019 - 2024 with a total value of $15 billion ( 1.95 trillion), collision or crash incidents ( 63%) and faulty workmanship or defective products ( 22%) accounts for 85% of the value.
Other incidents like natural catastrophes (four per cent), machinery breakdown (three per cent) or fire (one per cent) account for a much smaller proportion of claims by value.
Although motor and medical are still commanding the biggest share of the insurance sector in Kenya, aviation insurance is slowly growing due to rising chaos in the geopolitical space.
Last year, the segment recorded a growth of 15.58 per cent in insurance premiums from Sh2.6 billion in 2021 to Sh3 billion in 2023.
The Star spoke to James Mbithi, Britam general insurance CEO and principal officer on trends in aviation insurance in Kenya and East Africa.
Excerpt:
How does aviation insurance coverage differ among private, commercial, and state-owned aircraft, and what factors influence these distinctions?
Private, commercial and state-owned aircrafts usually require different forms of insurance. The level, and type of coverage will vary based on the unique needs, operational environments and risk profiles associated with each category of insurance.
For instance, risk exposure is a key factor, considering that commercial operations have higher risk due to the high passenger legal liability that could arise from the aircraft size (seats), number and frequency of flights, and operation area sizes (international flights).
On the other hand, private aircrafts have lower risk exposures. Other factors include regulatory requirements as varying levels of insurance coverage are usually imposed on private, commercial and state owned aircrafts with commercial aircrafts being imposed with more stringent measures and insurance standards.
Aircraft value and usage also greatly influences the type of cover issued by the insurer, with commercial and private aircraft usually insured on market value or replacement cost while state-owned or military crafts may be valued based on government assessment or market value.
Others are pilots’ qualifications and crew size and claim history and maintenance.
Looking at the Kenyan market, what does the landscape of airlines insurance look like, in terms of capacity to insure different types of aircrafts?
The Kenyan insurance aviation industry is relatively smaller as compared to global aviation markets. As such, the market currently does not have the capacity to insure large commercial airlines (passenger crafts).
The Kenyan insurers usually cede most of the risks to international reinsurance companies based in London, South Africa and Europe. On the other hand, local insurance companies have the capacity to fully insure private aircrafts and helicopters.
Further, helicopters involved in specialised activities such as rescue operations and aerial surveying require additional insurance based on their specific use and risk profiles.
How different is aviation insurance compared to say car insurance? What are some unique risks or liabilities associated with insuring private jets versus commercial airlines or government-owned fleets?
Aviation insurance is more complex as compared to motor (car) insurance. The type of coverage differs in that the magnitude or value of liabilities for aviation insurance is higher.
Aviation insurance covers a wide range of risks including the aircraft damage, passenger injuries and death, third party injuries and death, hijacking, war related activities, terrorism and third-party property damage on the ground.
Car insurance on the other hand covers damage to vehicle (if insured on comprehensive basis), third party injuries, third party death, fire and third-party property damage.
What specific elements or incidents are typically covered in an aviation insurance policy, and are there significant exclusions those owners or operators should be aware of?
Aviation insurance provides the owner of an aircraft with coverage in the event that the insured aircraft is accidentally lost or damaged as a result of collision or impact; offers liability coverage both passenger and public; Hangers’ liability coverage.
The typical types of covers includes: in-flight Hull Insurance Ground Risks Hull (Non-motion) insurance, Ground Risks Hull (motion) insurance, Public Liability Insurance, Passenger Liability Insurance, Combined Single Limit, Hanger Keepers’ Liability Insurance and Refuelers’ Liability.
In light of evolving safety technology, how are advancements in aviation tech affecting both coverage options and premium rates in the industry?
Technology has enhanced and worsened various aspects of aviation insurance. For instance, it has contributed to safety improvements by enhancing avionics; autopilot systems, collision avoidance, and predictive maintenance reduce accident risk, and would lead to lower premiums from the underwriters.
It has also birthed new coverage options where underwriters are offering products for emerging technologies like drones, autonomous aircraft, and cyber security risks, with specialized policies for these new risks.
It has also led to underwriting
efficiency, with big data, AI, and real-time flight data are enabling more
accurate risk assessments, leading to
competitive pricing for safety-conscious operators.
