Chris leads the Emerging Technology Unit at Global Aerospace, which provides insurance for aviation and aerospace assets with a particular focus on innovation and keeping pace with new technology.
Insurance is a key piece of the puzzle in asset finance, and will be especially important for an entirely new class of assets and supporting infrastructure with their own unique features and risks for owners, operators, passengers, lessors and financiers to understand and accept. Chris very kindly spent some time discussing these risks with us, and provided his thoughts on a few key questions.
1.AS: You wrote the insurance policy for drones more or less from scratch, creating new definitions for standard terms such as ‘premises’ along the way. Will insurers need to do the same for eVTOL aircraft, or can the policies for other assets (such as aircraft, cars, etc.) be combined and adapted?
CP: For the time being, the current policy forms provide adequate coverage. As new aviation verticals emerge, the insurance industry will need to assess the need for policy changes to accommodate the unique aspects of these new craft. This could include remote piloting, off-airport operations and new power sources.
2.AS: eVTOLs will presumably have a different risk profile to commercial aircraft, considering (for example) their operations at lower heights in higher density areas, their potential for autonomous operation, etc., with some similarities with billion-dollar airline risk, and some similarities with lower-value helicopter risk. What would you say are the most important aspects of the risk profile for these assets from the insurer’s perspective when assessing the right level of coverage?
CP: Insurers are required to provide appropriate coverage limits to meet the needs of their customers, while assessing the inherent risk factors and ensuring the long-term viability of the insurance product. From a financial perspective, the largest potential large loss following an aircraft accident generally relates to passenger injuries. While it is too early to understand the potential passenger profile for eVTOL aircraft, it is likely that, in the early days at least, passengers will be high net worth individuals. Achieving the necessary coverage limits will be a process that will involve insurers being satisfied that the appropriate levels of safety have been achieved.
3.AS: Vertiports will also have a unique set of risks and challenges to be assessed and managed – again, what are they key features of the risk profile for the ground infrastructure for the insurers to consider?
CP: One of the primary emerging risks is the electrification of aircraft. With it will bring aircraft operational risks, particularly during charging and storage. As vertiports are built, achieving safe environments for fast charging will be key. Beyond that, the downtown locations planned for urban air mobility transfers will create a higher risk operating environment.
4.AS: From the asset financier’s perspective, insurance forms a key part of the collateral package required from their asset-owning borrowers. With commercial eVTOL operations expected to commence over the next couple of years, when would you say we could expect the insurance product supporting these operations to be widely available?
CP: I believe that as soon as aircraft are being leased to operators, insurance will be available for the lessors. That said, operational safety criteria will need to be satisfied before those leases can be realized.
5.AS: You have said that those in the advanced air mobility industry should treat insurers like investors working alongside them, as insurers are making similarly big bets. What are the most important things you would urge those developing this ecosystem to consider in terms of insurance and risk?
CP: I think that early dialogue with the insurance community is important. The better educated insurers are about the aircraft, ecosystem and operational readiness, the more likely they will be to provide the coverage required. It should be appreciated that insurers often require higher standards than regulators for things like minimum pilot experience so getting input from insurers is a key part of the jigsaw.