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Aviation Market Hardens Amid Pandemic Turbulence - YouTube
Channel: CRC Group - Wholesale & Specialty Insurance
[1]
Dan Wentz: It's no secret that
the pandemic hit the aviation
[4]
industry hard. 2020 was the
worst year in history for air
[7]
travel demand, the International
Air Transport Association
[10]
estimated losses to be at $126.4
billion 2020. One's estimated
[15]
losses are predicted to be less
than half of that at 47. Point 7
[19]
billion. compare those
statistics with the fact that
[22]
the aviation market was
hardening before COVID-19. And
[25]
you realize that the industry
faces significant challenges,
[28]
but the airline industry is here
to stay and they need insurance
[32]
coverage. That's where Camille
Knight comes in. She's a senior
[35]
broker with the CRC Indianapolis
office and is new to CRC but has
[39]
extensive experience in writing
aviation industry risks. We'll
[43]
talk to her next here. Welcome
to the placing you first podcast
[47]
from CRC group. I'm your host
Dan Wentz. And this podcast
[51]
features news and insights from
CRC group's vast knowledge base
[54]
of 4300 plus associates who
write in excess of $23.5 billion
[59]
of premium annually, and we're
giving you insider access to
[62]
what's happening in our company
and the types of insurance we
[65]
place. This is the placing you
first podcast we're joined with
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Camille knight who is sort of
brand new to CRC. A couple
[77]
months in with us here, it's CRC
group. And you know, you've got
[80]
an interesting story. You focus
primarily on aviation. I
[85]
specialize in this stuff.
[86]
Camille Knight: I do. Yeah. So.
[89]
Dan Wentz: So what all does that
incompetent mean aviation's kind
[92]
of a big world. And we don't
talk about it a lot here on this
[96]
podcast, that's for sure. This
is our first aviation focused
[99]
podcast. So maybe you can talk
about a little bit about what
[101]
you do and what all that
entails. Sure,
[103]
Camille Knight: yeah, well, a
common misconception is that
[106]
aviation insurance strictly
deals with just aircraft
[110]
insurance. While I do write a
lot of aircraft insurance,
[116]
there's more to it than that.
Many of your other property and
[120]
casualty forms are going to
exclude any type of aviation
[124]
exposure. The majority of
aviation insurance policies are
[128]
written by the respective
insurance company and not on
[131]
standard ISO forums. Examples of
this are airport liability
[136]
coverage, general liability
coverage for maintenance
[139]
facilities, and product
liability coverage for these
[143]
aviation parts manufacturers.
Workers Compensation is also a
[147]
type of coverage that can
benefit from working with an
[150]
aviation insurance company.
They're able to provide better
[154]
loss control resources that are
tailored specifically for an
[157]
aviation exposure. You'll also
be working with things
[161]
professionals with aviation
experience, and most of them
[164]
actually have an aviation
background as well. Wow, that's
[167]
great.
[168]
Dan Wentz: So how did you get
into specifically focusing on
[171]
aviation? Is this interests you
more than other parts of
[174]
insurance?
[175]
Camille Knight: Do? You know I
think that focusing on aviation,
[180]
it just encompasses, like you
said, a whole different world, I
[184]
mean, you're gonna have your
aircraft insurance that provides
[187]
Hall and liability coverage. But
I also get to deal with, you
[193]
know, workers compensation, as
well as general liability
[197]
coverage. So there's so much
that encompasses aviation that
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it's a different risk every day
that I can work on.
[206]
Dan Wentz: Yeah, and that sounds
fun and exciting, for sure. So
[209]
let's, let's talk a little bit
about this. What's going on
[212]
currently in the aviation
industry and how it relates to
[216]
aviation insurance,
specifically, the pandemic has
[220]
hit the sector pretty hard from
what I understand. People
[225]
weren't flying last year, right.
So maybe you can talk a little
[228]
bit about how that how the
pandemic is playing into
[231]
aviation insurance kind of
setting the tone here.
[235]
Camille Knight: The pandemic
entered a time in the aviation
[238]
insurance industry when the
market was already in the
[241]
process of hardening. Like you
said, with the lockdowns in
[244]
place, airlines weren't as busy
because people weren't flying.
[248]
Other aviation operations such
as IPOs flight schools and
[253]
maintenance facilities were also
not able to generate much
[256]
revenue. Unfortunately, the
aviation insurance market has
[260]
continued to steadily increase
their rates, despite the lower
[264]
revenues from 2020 aviation
operations. In addition, the
[269]
lower revenues coverage concerns
that we didn't really have
[273]
before such as loss of business
income due to grounding and
[278]
communicable diseases like COVID
have been rising and aviation
[282]
insurance carriers are still
trying to come up with solutions
[286]
for these types of exposures. So
while the pandemic certainly
[290]
hasn't helped the aviation
insurance industry, the
[293]
hardening aviation market was
already in effect and was not
[297]
you know, did not benefit from
the current pandemic. So when I
[301]
started in this industry, almost
10 years ago, we were in the
[305]
middle of a soft market. Stock
Market continued for a few more
[310]
years, until a few major
catastrophic claims, such as the
[316]
Malaysia Airlines tragedy, and
then the grounding of the Boeing
[320]
737. max started to pay out
multiple insurance companies
[325]
were, you know, on the hook and
involved in those claims. So
[331]
ultimately, that resulted in
higher rates and more stringent
[334]
requirements in the general
aviation insurance marketplace.
[341]
Dan Wentz: Yeah. And you don't
think, you know, there's been so
[344]
much that's happened in the past
two years, you almost forget
[348]
about the 737 issue. And that
was a big deal before COVID hit?
[352]
Camille Knight: Yeah, that
[353]
Dan Wentz: was in the news. This
is planes, we're having issues.
[356]
Yeah. And I mean, you have,
[357]
Camille Knight: you know, the
big losses, you know, the Kobe
[360]
Bryant helicopter crash, lots of
other crashes. So you think
[365]
about the limits involved with
those. And the number of
[369]
passengers on those airlines and
the high net worth individuals.
[374]
I'm involved with the liability
suits, especially you know, Kobe
[378]
Bryant's family, I'm not only
does that gain, you know, a lot
[383]
of you know, media about it. But
there's also high limits at
[389]
stake.
[389]
Dan Wentz: And that definitely
will affect everybody else.
[392]
Yeah, rates, right. So what is
happening on the rate front,
[396]
with all that being
[398]
Camille Knight: considered
rates, for the past two or three
[401]
years have been increasing about
25 to 30% or more in the last
[406]
few years. Um, unfortunately, it
seems that the industry is
[411]
trying to repair the effects of
a soft market by rapidly
[415]
imposing these higher rates.
We've also had a few of the
[420]
insurance companies that wrote
these aviation policies exit the
[424]
marketplace. So that's led to
less capacity within the space
[428]
as well. So unlike other sectors
in the aviation, or in the
[433]
insurance industry, in general,
aviation insurance is only
[437]
written by a handful of cares.
Having an insured or retail
[442]
agent approach, multiple
insurance brokers only muddies
[446]
the waters when it comes to
getting the best terms for your
[450]
insured because it's just going
to lead to blocked markets and
[453]
duplication of effort. So my
recommendation, obviously, is to
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work with one knowledgeable
broker that has strong
[462]
relationships with the
underwriters to obtain the best
[466]
terms possible in this aviation
industry. Yeah, and
[469]
Dan Wentz: if you're looking for
someone who's who's got those
[471]
relationships, I mean, here's
Camille. Yeah. He definitely
[475]
have it right now. And that's
great. Yeah, I can I can just
[479]
imagine a retail agent trying to
go out and do this all on their
[483]
own. I mean, that would, that
would certainly could end up,
[486]
you know, costing them the
account, I would think if they
[489]
blocked the markets, and they're
not, especially with the rate
[492]
situation, the capacity, you got
to have someone who knows what
[495]
they're doing specializes in
exactly.
[498]
Camille Knight: Um, you know,
having somebody knowledgeable
[501]
about aviation insurance,
talking to these underwriters,
[505]
you're able to negotiate better
terms because everybody has a
[508]
clear and concise understanding
of the risk. And knowledgeable
[512]
broker is able to ask the
pertinent questions and do a lot
[516]
of the pre underwriting
beforehand, which leads to
[520]
making it easier for the
underwriter to understand it and
[524]
more willing to work with you.
[526]
Dan Wentz: So more people are
flying private nowadays. I would
[530]
assume that's because they're,
you know, they feel more
[534]
comfortable flying, right? With
COVID, and everything else going
[539]
on? What What should those types
of accounts be aware of when it
[545]
comes to insurance? Obviously,
that would be a little bit
[548]
different than just regular run
of the mill aviation insurance
[551]
if you're got a private jet.
[554]
Camille Knight: Oh, sure.
Obviously, with private jets,
[557]
you're going to be dealing with
a more expensive aircraft and
[561]
probably more high net worth
individuals flying in those
[565]
aircraft. So the flying
community is a pretty tight knit
[570]
crew. This leads to a lot of
conversations by aircraft owners
[575]
pilots, where they discuss
insurance terms coverage and
[579]
requirements. One thing that I
like to stress because I've had
[583]
this conversation with insurance
retail agents is that aircraft
[589]
coverage is not all apples to
apples. There are several
[593]
factors that go into writing an
aircraft such as the type of
[597]
aircraft the age, the use of the
air. craft the pilot experience
[602]
where the plane is going to be
going and the limits they're
[604]
going to need. I would encourage
any potential buyers of aircraft
[609]
insurance to provide as much
information as possible on their
[614]
application, especially when it
comes to pilots, if they are
[618]
going to be utilizing pilots who
may not have as much experience
[622]
in the aircraft that they are
purchasing, having a detailed
[626]
training plan and timeline will
work to their benefit and
[630]
obtaining the best insurance
that they can get
[633]
Dan Wentz: a lot to consider
there and you don't really, you
[635]
know, I take it for granted, I
fly commercial. So I just assume
[638]
the pilots good to go, you know,
you don't really have a
[640]
relationship with him. But when
you get into private, yeah,
[642]
you're gonna be hiring pilots to
operate your jet, so does the
[647]
size of the jet matter. So say
you've got a big private jet is
[650]
that treated differently than a
small private jet.
[653]
Camille Knight: So it is not the
size of the jet really, but the,
[657]
like I said, the experience of
the pilot or pilots operating
[660]
the jet that's going to, you
know, be the most of concern.
[664]
So, you know, you can have a jet
that holds, you know, 15 to 20
[669]
people. And, you know, if you
have a pilot that are pilots
[674]
that are highly experienced that
shouldn't, you know, be that big
[678]
of a concern. However, you're
going to want a dual crew
[683]
complete, comprised of strong
pilots with lots of experience
[687]
specifically in that making
model. And they're also going to
[691]
need to have done formal
training at a school that offers
[696]
a flight simulator. Another
factor to consider when insuring
[701]
jets that can carry more
passengers is the liability
[705]
limit. There are usually high
net worth individuals in this
[709]
jets. So I would advise the
insured to obtain the highest
[714]
limits they can afford and
obtain.
[716]
Dan Wentz: What about those
those people who rent an
[719]
aircraft and don't actually own
the aircraft? Are there
[722]
differences there?
[724]
Camille Knight: Yes, so there's
two different types of non owned
[728]
aircraft coverage. One is for
you know, your regular
[733]
individual who was starting to
fly and wants to rent a light
[737]
aircraft for their own personal
and business use, I can provide
[742]
a non own aircraft policy, which
will give coverage for bodily
[746]
injury, property damage,
liability for anything that
[750]
they're liable for, as well as
non owned physical damage
[754]
coverage for the aircraft
itself. One thing I do want to
[758]
note is that non owned aircraft
liability will be secondary and
[762]
in excess of any primary
insurance available for the
[765]
aircraft. pilot will need to
confirm that they will be
[770]
considered an insured approved
pilot on the primary policy and
[775]
not solely depend on their non
owned aircraft liability for
[779]
coverage. Another type of non
owned liability is the corporate
[785]
non owned liability. This is
where the companies, you know,
[791]
rent jets to fly them for
corporate travel. Again, this
[796]
non owned coverage is going to
be secondary and an access of
[800]
the primary insurance so the
insured will need to be listed
[804]
as an additional insured on the
primary policy for the aircraft
[808]
that they will be renting.
[810]
Dan Wentz: What about drones?
Are drones insurable? That's
[814]
what you when you think aviation
you don't really think drones
[817]
but that Yeah, honestly, is it?
Yeah. Is that something you
[820]
Camille Knight: dabble into?
Yeah. Essentially drones,
[823]
especially whenever they're used
for a commercial purpose. All of
[828]
that is regulated by the Federal
Aviation authorities. So yes, I
[833]
can insure those, especially if
they are being used
[835]
commercially. They've definitely
risen in popularity in the last
[839]
five years, especially with a
pandemic. And, you know, more of
[845]
these other types of businesses
are using it such as real
[850]
estate. A lot of roofers are
using it for roof inspections,
[856]
photography, aerial surveying.
So these drones are going to be
[864]
regulated by the FAA. They are
going to have to abide by the
[869]
FAA drone rules also called the
part 107 rules. These rules
[874]
require all of the commercially
used drones to be operated by
[878]
those who have obtained their
remote pilot certifications.
[882]
There's also other regulations
in place such as having a remote
[888]
identification that will contain
information to identify the
[891]
drone making sure that drone is
not flown in any into any
[896]
commercial airspace, not you
know, hurting anybody are, you
[901]
know, have the potential to lean
on anybody.
[904]
Dan Wentz: And that's a that's
an area that I would think is
[907]
about to explode because
everyone's talking about using
[910]
drones for warehousing like the
Amazon stuff and the Yeah, that
[915]
there's gonna be more and more
drones in the sky as time goes
[918]
on.
[918]
Camille Knight: Yeah, sure. I
think it's going to be
[921]
inevitable, especially, you
know, with, as many of us
[924]
ordering things from Amazon,
we're gonna have those drone
[928]
delivery services, probably in
the near future, I think that
[932]
the FAA still has a ways to go
in being able to regulate
[938]
payloads being dropped from the
drones. However, I wouldn't be
[942]
surprised if we are seeing it,
hopefully, probably in the next
[946]
five or six years or so.
[949]
Dan Wentz: That would be a great
account to have.
[951]
Camille Knight: Yeah, well, I
don't know. Maybe a few years
[955]
after they've, you know, tested
it thoroughly is figured out, I
[958]
want to write. If anybody has a
risk like that, I'll be more
[962]
than happy to look at it. Okay,
[963]
Dan Wentz: so we've got a lot of
retail agents listening to this
[966]
podcast, what are some key
takeaways that you have for them
[970]
as they move forward and placing
aviation insurance?
[974]
Camille Knight: Sure. Aviation
insurance is a very niche
[977]
market, and it requires
experience and expertise in this
[982]
industry. Working with one
knowledgeable aviation insurance
[986]
broker who has access to the
pertinent aviation insurance
[989]
carriers, is critical in gaining
the best terms for your clients.
[993]
A good broker will make sure all
of the key factors of the
[997]
aviation risks are thoroughly
discussed to ensure that
[1000]
insurance companies have a clear
understanding of the risk
[1004]
profile underwriters really
appreciate that and they
[1008]
appreciate the pre underwriting
and in turn will provide us the
[1011]
best terms possible. Okay,
great.
[1013]
Dan Wentz: Well, thank you very
much for joining us coming on. I
[1015]
appreciate it. And hope to talk
to you again soon. This is one
[1019]
of the more interesting podcasts
I've been able to do. Yeah,
[1023]
aviation is so different, right?
[1025]
Camille Knight: Definitely is
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