The South African Civil Aviation Authority (SACAA) recognised an urgent need for regulation of drones or Remotely Piloted Aircrafts (RPA) in order to ensure the safe operation of this technology within our local airspace. This culminated in the drafting of regulations in collaboration with the International Civil Aviation Organisation (ICAO) which came into effect on 1 July 2015.

After banning the use of drones altogether in June 2014, the SACAA, together with the Department of Transport and other key industry role players, developed these new regulations, making South Africa one of only four countries globally to have relevant legislation for the commercial use of drones.

This novel legal framework has set the stage for the first fully operational commercial drone operators to commence business. The vast range of commercial applications of drones comes with inherent risks and the necessity for adequate insurance products for operators. Part 101.04.12 of the regulations states that remote piloted operator certificate holders should at all times be adequately insured for third party liability.

Lloyd’s produced an emerging risk report titled “Drones take flight” which investigates the insurance industry’s role in drone safety and identifies five fundamental risks facing the sector:

  • Negligent or reckless pilots: Adequate development of training and licensing schemes are imperative to provide assurance of operators’ capability. Insurers are likely to have particular concerns regarding moral hazard, as pilots on the ground could feel disassociated from the risk occurring in the air. Some insurers may require a higher risk retention unless operators demonstrate responsible and safe behaviour.
  • Patchy Regulatory Regimes: There are inconsistencies between drone laws governing different jurisdictions as many countries are only developing regulations around drone operations at this stage. To counter this uncertainty, robust regulations are needed and this, in turn, will allow insurers to make provision for drone operators. Other important factors for the success of the regulatory regime are harmony across international standards and clarity regarding third party liability.
  • Poor Performance: The industry is growing too rapidly and unevenly for regulators to provide strong oversight without technological support. Tracking or monitoring technology (such as “Geo-fencing” technology to prevent drones from straying into controlled airspace) would assist operators to stay within the confines of the law.
  • Vulnerability to cyber-attack: Drones could be vulnerable to cyber-attack with some reports suggesting there is a thriving community of “drone hackers”. Cyber security measures would have to be increased significantly to fare favourably in underwriters’ risk assessment of commercial drone operations.
  • Privacy infringement: This is perhaps the most cited public concern about drones. Professional indemnity insurance can cover the cost of damages awarded for breach of privacy against drone operators. Key requirements for insurance are expected to include the completion of privacy impact assessments and compliance with applicable regulations and laws.

The South African regulations deal with many of the issues raised in Lloyd’s risk report. New applications for the use of drones will come to light as the industry develops. In such a fledgling industry, these developments will necessitate the adaptation of existing regulations and revised assessments of insurance risks. Drones have huge potential to enhance a range of activities. One certainty is that drones are here to stay and as certain commentators note, they are likely to take over numerous manned aviation functions and jobs.