The global popularity of unmanned aircraft systems (UAS) in commercial and recreational applications is rapidly increasing, and in line with the bureaucratic scurry around the world to regulate the use of UAS, insurers will equally be required to react accordingly and develop UAS specific insurance product and liability cover. However, the regulation of UAS is a global endeavour in its infancy, and the potential risk of pervasive drone usage within civil airspace is seemingly limitless and, to a large extent, unfamiliar.

South Africa's response to the growth of UAS in the worldwide and local aviation sector is set forth in Part 101 of the Eighth Amendment to the Civil Aviation Regulations (the RPAS Regulations), which pertains specifically to remotely piloted aircraft systems (RPAS) and which will regulate the impending and inevitable surge of RPAS operation in South African civil airspace. The RPAS Regulations are a major step toward the integration of RPAS into the South African civil aviation sector, and the advent of RPAS specific regulations are in line with similar efforts by civil aviation authorities around the world, including the American Federal Aviation Administration, which issued a Notice of Proposed Rulemaking in respect of unmanned aircraft on 15 February 2015.   

Prior to the advent of the RPAS Regulations, the operation of UAS in South Africa was illegal, and according to a statement by the South African Civil Aviation Authority on 3 June 2014, no UAS was capable of complying with the requirements for operating an aircraft in South African civil airspace prescribed in the Civil Aviation Regulations.

While RPAS have been operated in South Africa for some time prior to the advent of the RPAS Regulations (albeit illegally in most instances) by recreational and private users, such operation was not widespread in relative terms, and virtually non-existent in commercial spheres. Insofar as the civil aviation regulatory framework has now been adapted to accommodate the commercial applications of RPAS, it is inevitable that the commercial use of RPAS in South Africa will increase significantly and, with it, the market for RPAS specific insurance.

The purpose of this article is to identify and discuss certain necessary considerations for insurers in developing insurance products suitable to, and in respect of RPAS operations. This will be done, firstly, by defining RPAS and exploring the unique characteristics of these machines. Secondly, the potential and likely uses of RPAS in South Africa based on foreign commercial applications of RPAS will be considered. Thereafter, the difficulties and risk considerations related to RPAS insurance will be discussed, with a particular focus on one prevalent area of concern in respect of the operation of UAS in South African civil airspace, namely privacy rights. Finally, the manner in which insurers may commence developing insurance products tailored to the use of RPA will be briefly outlined. 

It is asserted herein that RPAS by the nature of the devices and their operations, pose unique and unprecedented risks, and the task of developing RPAS specific insurance coverage for RPAS would involve more than the simple adaptation of current aviation insurance products pertaining to manned aircraft.

What are RPAS?
Generally, and with regard to the varying definitions of such aircraft, RPAS in the broadest sense is universally understood to be any aircraft controlled or managed remotely by someone not on board, as well as that aircraft's associated operational systems. Accordingly, the RPAS Regulations define a remotely piloted aircraft as "an unmanned aircraft which is piloted from a remote pilot station, excluding model aircraft and toy aircraft...", and the remotely piloted aircraft system as the "set of configurable elements consisting of a remotely piloted aircraft, its associated remote pilot station(s), the required command and control links and any other system elements as may be required at any point during flight operation". The term RPAS herein is used to describe the aircraft itself and/or the associated systems. The exclusion of model and toy aircraft from the definition of RPAS is suggestive of the legislative intention to distinguish regulated RPAS by their intended use, as opposed to simply by the nature and type of a given device.

The RPAS Regulations pertain specifically to the operation and/or registration of RPAS and the licensing and certification of remote pilots in certain instances. The operation in South African airspace of autonomous unmanned aircraft, being any aircraft that is not capable of being managed on a real-time basis during flight, is specifically excluded by the Regulations. Accordingly, and with the understanding that RPAS do have certain functionality the performance of which is autonomous, the risks associated with autonomous UAS are not surveyed herein. 

RPAS may broadly be categorised as either fixed wing or rotary wing, the latter referring to a rotary blade setup akin to conventional helicopters. The format of RPAS will largely depend on its intended purpose.

As set out by Cognizant in its October 2014 report entitled Drones: The Insurance Industry’s Next Game-Changer, RPAS are unique and distinct from manned aircraft in that they are typically lightweight and small, often with the ability to fit into an ordinary motor-vehicle, they utilise highly efficient propulsion systems that enable quiet flight and hovering capability, they require minimal use of runways and landing pads with options for vertical take-off and landing, and pilot licensing and training is far less stringent than that of conventional manned aircraft. 

The utility of RPAS in relation to manned aircraft 
Given the distinguishing features of many RPAS as described above, RPAS have inherent utility, with specific reference to commercial and state operations, as compared to manned aircraft. The most clearly observed and indeed defining characteristic of RPAS is the absence of on-board personnel and pilots, which allows manufacturers to produce smaller and more lightweight aircraft tailored to specific requirements.

RPAS are proving to be the instrument of choice in commercial applications across many industries. Online retailer Amazon has revealed plans to deliver consumer products to consumers within half an hour of those products being ordered. Similarly, Domino's Pizza is testing the "DomiCopter" for the intended purpose of pizza delivery to customers, and has uploaded video footage on the internet of their unmanned aircraft conveying a Domino's Pizza box.  

In addition to consumer product delivery, RPAS are being utilised by oil and gas companies to inter alia map and monitor terrain and detect oil spills; by search and rescue service providers to assess the danger of high risk operations; by farmers to monitor crops, reservoirs and perimeter fences; by media and entertainment professionals to capture footage; by property developers and architects to obtain aerial footage of land and buildings; and by state departments in surveillance and law enforcement.

Indeed, commercial and state operators of RPAS are partial to eliminating the risk of human injury in less than ideal flying conditions. The manoeuvrability and size of RPAS enable operators to gain access to otherwise inaccessible or at least, less accessible locations and, in turn, allow their operators to gather useful and otherwise unobtainable data in an efficient and cost-effective manner when compared to manned aircraft. The cost of RPAS is declining with the rising demand for such aircraft, and RPAS would in any event be more cost-effective to buy, run and maintain than conventional aircraft. 

The attraction of RPAS to businesses and state organisations is significant and blatantly evident, and the regulation of RPAS operations (as is to come into effect in South Africa in July 2015) is highly likely to bolster the intention of businesses to incorporate RPAS into their daily functioning. Insurers are thus likely to be faced with the particularly onerous task of developing RPAS relevant products and cover. 

Considerations for insuring RPAS in South Africa
Regulation 101.04.12 of the RPAS Regulations states simply that "an ROC (RPAS operator's certificate) holder shall at all times be adequately insured for third party liability". Private operators of RPAS are not required to obtain operator's certificates in terms of the RPAS Regulations. Accordingly, only commercial, corporate and non-profit operations of RPAS would require insurance against third party liability.

An analysis of the complexities involved in developing suitable insurance cover for RPAS and their operators is obfuscated by the fact that, given the infancy of the sector, limited data is available to guide insurers that would ordinarily and necessarily require experience in the risks posed in commercial RPAS operations. The potential average quantum of damages that may be suffered by third parties in relation to unmanned aircraft, the frequency of crashes and general loss ratios in respect of RPAS and annual utilisation figures of RPAS are all, at present, largely left to speculative analysis. Currently, no specific underwriting expertise for large scale RPAS operation is readily available. Insurers would be required to cautiously consider the manner in which RPAS insurance cover is developed and ultimately priced, in light of the fact that historical data on the risk insured against would not be available for some time. This problem would be exacerbated by the likely upsurge in RPAS operations in South Africa.

As a starting point, it is thus necessary to draw on the practical considerations of global insurers providing RPAS and RPAS operator insurance cover in foreign jurisdictions for the purpose of commencing the formation of such cover for the South African RPAS sector.

Prior to examining the identified potential risks of RPAS flight, it must be repeated here that the infancy of regulated RPAS is global, and insurers in other countries are evidently at a similar juncture regarding the development of RPAS specific insurance coverage. Illustrative of this point is the Steer Davies Gleave 2014 Study on the Third-Party Liability and Insurance Requirements of Remotely Piloted Aircraft Systems (RPAS) prepared for the European Commission, according to which, with reference to the European Union aviation related liability regimes, it is the case that the various member states have divergent legal requirements in respect of third party liability insofar as some utilise a strict liability approach, while others are fault based in nature. The intricacies of this divergence is not examined here, save to observe that as per the aforesaid study these legal requirements in general do not distinguish between manned and unmanned aircraft, and aviation insurance requirements pursuant to applicable aviation regulations do not envision the use of RPAS en masse. The study goes on to assert that RPAS specific minimum levels of insurance are to be determined to ensure that these are reflective of the potential damage caused by RPAS, that such minimum levels are appropriate in the face of drastic RPAS market changes, and that they are capable of effectual enforcement. It is thus seemingly the case that, at present, the development of RPAS insurance is a "best guess extrapolation" of current aviation insurance products.

Returning to specific risk considerations, various potential risks of RPAS flight have been identified by commentators including, but not limited to, ground damage, air-to air collisions, communications interference, cyber-attack/hijacking, violation of constitutional and landowner rights, and environmental concerns.

In respect of ground damage, Geoffrey Christopher Rapp quoting William T Thompson et al, notes in his article Unmanned Aerial Exposure: Civil Liability Concerns Arising from Domestic Law Enforcement Employment of Unmanned Aerial Systems, that the introduction of RPAS to domestic airspace systems would inevitably lead to ground damage, and that "to date, UAVs have had a higher mishap rate than traditional manned aircraft". Regarding air-to air collisions, Mathew Wald in the New York Times states that RPAS do not possess the "collision avoidance systems that are required on airliners". The see and avoid principle of flight is thus, at best, restrictively applied in respect of RPAS, thereby increasing the risk of such collisions with inter alia other aircraft.  

The Allianz Global Corporate & Speciality (AGCS) Aviation Safety Report 2014 Study makes reference to frequency interferences that result in complete loss of control of RPAS and, ultimately, fatalities upon ground collision of the RPAS. The study further alludes to cyber-attacks on aircraft in light of the increased reliance on technological systems, and states that "Cyber terrorism may replace the hijacker and bomber and become the weapon of choice on attacks against the aviation community". RPAS, while remotely piloted, perform various functions autonomously in aid of the operator controlled flight, and utilise GPS referencing to this end. It is thus the case that partial and/or complete disruption of the communication link with RPAS while located in domestic airspace would have potentially catastrophic results for those on the ground as well as the aircraft itself.

With regard to privacy rights, nuisance and trespass issues related to RPAS, Jane Duncan in her article Drones in South Africa: the good, the bad and the ugly, makes reference to "their unprecedented capacity for undetected, pervasive mass surveillance of people", and describes them as "a unique threat to privacy". Given the predominant uses of RPAS as referred to above, one does not need to stretch the imagination to consider the plethora of circumstances in which RPAS operation would come into conflict with privacy and landowner rights. The issue of privacy rights infringement in a South African context with regard to RPAS is discussed more fully hereinafter.  

The RPAS Regulations themselves make provision for "Beyond Visual Line of Sight" or B-VLOS operations of RPAS, delivery and deployment of objects by RPAS, night time operations, operations in the vicinity of people, property, structures and buildings, and operations in the vicinity of public roads, all in circumstances where the operator of the RPAS holds the relevant operator's certificate (ROC) and the Director of Civil Aviation (the Director) has approved such operation parameters. With regard to such operations together with the potential commercial use of RPAS for inter alia delivery or surveillance functions as alluded to above, it is clear that RPAS operations are contemplated in in and about urban areas, and in close proximity to people. It is arguable that in the event of RPAS being used for delivery of goods functionality to customers of a business, and given the available sizes and formats of RPAS, RPAS may gain approval from the Director to enter residential and business premises in the execution of its intended commercial function, or to travel in otherwise unprecedented proximity to roads, property and people. It is thus evident that, by a mere examination of the RPAS Regulations and the potential operations of RPAS, the adaptation of conventional aviation insurance coverage in respect of manned aircraft is likely to be found wanting, alternatively, the process itself will prove to be convoluted to the extent that the development of entirely new cover would be a more prudent trajectory.

The right to privacy
As stated, the commercial operation of RPAS in South Africa will in all likelihood bring RPAS into close proximity with inter alia urban (residential) areas for varying reasons, one of which potentially being pizza delivery (Domino's Pizza recently re-entered the South African market, and insofar as our RPAS sector is now regulated, South Africa may become the proving ground for the "DomiCopter"). Further, their size, and the silent manner in which they operate, coupled with the fact that RPAS are commonly utilised in surveillance and data collecting applications, elevates the risk that RPAS may intentionally (on the part of its operator) or inadvertently contravene, among others, privacy rights. Indeed there are documented occurrences of RPAS being operated in direct violation of individual rights to privacy. 

Section 14 of the Constitution of the Republic of South Africa affords all South Africans a right to privacy, the scope of which pertains to aspects in respect of which a legitimate expectation of privacy can be harboured. The protection of privacy in South Africa is, in addition to the Bill of Rights and the Constitution, founded in common law authority and in legislation. It is beyond the scope of this article to delve into the legal evolution of privacy protection in South Africa, save to state that a violation of privacy, be it in respect of persons themselves or of personal data and/or information belonging to such persons, is actionable, with available common law and legislated remedies available to the "victim" of such intrusion.

For the purpose of surveillance, capturing footage and data acquisition, RPAS are capable of, and in fact are specifically manufactured in such a way as to have installed to them high quality and high definition camera and sound recording equipment.  Further, high definition camera equipment and video captured therefrom is often utilised by RPAS operators to control the aircraft. In light of the use of RPAS to be located well within urban areas and indeed over and in the airspace above private property for various purposes including data, imagery and video footage gathering, it is likely that infringements of privacy in the form of spying, unsolicited imagery and personal data acquisition will occur.

In support of this point, Jane Duncan states that "Drones with ‘hover and stare’ capabilities can violate physical privacy by, for instance, filming a person without their consent and even knowledge, and informational privacy, in that this data may be used to expose things about people that they don’t want to be exposed. The fact that drones operate well above eye level gives them massively intrusive potential".

Legal argument in respect of intentional versus negligent surveillance and data collection is likely to come to the fore in the determination of delictual liability of RPAS operators, and it is likely that many RPAS operators will be found to have intruded on individual privacy with specific intent, it being understood that employees of businesses may abuse the RPAS operations. Alternatively, it may be the case that in certain instances, the documented purpose and scope of operations of RPAS, that is the parameters of use of a given RPAS may be exceeded or deviated from in the carrying out of RPAS commercial functions. As the American Civil Liberties Union (ACLU) has argued, as stated by Jane Duncan, "drones are notoriously susceptible to mission creep, where drones are acquired for one set of stated purposes, and then used for another. So a drone that is acquired for utility management, for instance, could be used to keep tabs on public utility workers". Liability in respect of RPAS operators is thus a likely result of the widespread commercial operation of RPAS.

Insurers may seek to exclude liability for privacy rights contraventions in respect of RPAS. However, this may significantly reduce the attractiveness of acquiring comprehensive RPAS insurance cover. It must be borne in mind that the RPAS Regulations prescribe only third party liability insurance cover for RPAS operators, and only in respect of RPAS to be employed in commercial, corporate or non-profit operations. There is no legislated requirement for the RPAS itself to be insured in terms of a product or "hull all risks" type policy, notwithstanding the fact that most businesses would seek such cover in respect of their RPAS. 

As noted in the Steer Davies Gleave Report, insurers would invariably rely on businesses taking up more than simply third party liability insurance, in the absence of which, they may experience a situation wherein the demand for RPAS insurance exceeds the availability of such insurance. The reason for this would be that, in the case of third party liability insurance only, "the size of the market would be low in comparison to the amounts insured", thus preventing a "spread of the risk within the sector". 

Accordingly, insurers would be well advised to carefully regard the protection of privacy issues in respect of RPAS operations, and the resultant operator liability therefor when developing RPAS specific cover.

Developing RPAS insurance cover
In light of all of the foregoing, it is asserted here that insurers would be remiss in not developing RPAS specific cover and opting instead to attempt to utilise and adapt existing products in respect of conventional manned aircraft. In stating this, it is not meant that existing insurance cover for manned aircraft is not to be referred to at all, but rather that insurers are to do so merely for guidance in the development of RPAS tailored cover.

Further, in attempting to understand the risk associated with RPAS, insurers should aim to gather as much of the available data as possible regarding RPAS incidents and the causes thereof and they should identify trends in relation to the operation and common accidents related thereto.

Vikki Stone, Senior Vice President of Los Angeles headquartered brokerage Poms & Associates, notes the fundamental inquiries to be made in respect of commercial RPAS insurance thus:

"To properly insure these aircrafts, insurers will need to know their function or intent, their takeoff and landing locations, whether they will be operating over populated areas, and their flying altitude. And because these systems can collect massive amounts of data, they can pose a threat to individual privacy and a significant challenge for insurers. In drafting policies, insurers must know how the owner of these aircraft systems will use the data it has gathered and what steps it will take to safeguard or destroy the information it has amassed."

In addition to the foregoing, and insofar as the RPAS Regulations make provision for inter alia approval and renewal letters, certification and registration, installation of altimetry, personnel and operator licensing, training and examinations, and submission of operations to the Director for approval in respect of RPAS, insurers would be in a position to rely on the extent of compliance with the RPAS Regulations by RPAS owners in the assessment of risk. Insurers would also be entitled to incorporate into any policy that any submission to the Director for approval, such as submissions of operations parameters and the like, be submitted to it for approval either prior to, or contemporaneously with the submission thereof to the Director. Insurers would undoubtedly pay due consideration to the relevant experience and age of intended operators and the age and flight hours of the aircraft.

Finally, the continuous development of RPAS specific cover in the increasingly dynamic RPAS environment would be facilitated if insurers sought to harmonise their cover offerings with such offerings in other jurisdictions. In this manner, the representative sample from which insurers would gather data in the assessment of risk would exponentially increase.

As is evident, there are varying difficulties that will present themselves to insurers attempting to develop RPAS specific insurance, primarily related to the rapid growth of the sector coupled with the lack of data pertaining to operations and incidents of RPAS and, in turn, the preclusion from conducting any meaningful risk analysis. However, what is clear is that RPAS are necessarily distinct from manned aircraft in their nature and utility, and in this regard insurance cover for manned aircraft is inapplicable to the intricate operations of RPAS. Accordingly, RPAS specific cover is to be developed notwithstanding the plethora of difficulties to be faced in doing so.