NEW AVIATION TECHNOLOGY PROMPTS INSURANCE PROVIDERS TO RECALIBRATE RISK ASSESSMENTS

For some in the aviation industry, eVTOL aircraft present a door to market expansion, while responding to the imperative to rapidly cut air travel’s impact on the environment. For travelers, they promise more responsive connectivity, allowing them to reach places aircraft have not reached before and at a price point that is competitive with ground transportation. For the insurance industry, meanwhile, they represent a new risk that must be quantified and covered.

This is what prompted insurance group Global Aerospace to announce the formation of its Emerging Technology Unit last month. Under the leadership of Chris Proudlove, the team of underwriters and claims specialists is focused on the product liability and operational risks associated with a broad range of new advanced air mobility (AAM) vehicles and business models, building on the U.S.-based group’s existing involvement in uncrewed aircraft systems (UAS).

“Global remains focused on areas where we can grow and support the future of our industry,” said group CEO Rachel Barrie. “This new team will enable us to pivot quickly on emerging products to provide effective insurance solutions for our clients.”

For insurance companies, the use of new electric propulsion systems and reduced-carbon biofuels is part of the monumental change that has to be assessed from a risk perspective, as is the increased level of operational automation. “We have to look at all the risks and how they impact safety and reliability, and there are going to be some bumps in the road,” Proudlove told FutureFlight. “For instance, the increased autonomy in the flight deck could potentially make flight operations safer, but, at the same time, the onboard pilots, who will be more like safety pilots, have to make sure their skills and proficiencies are kept up to date.”

The new Global team is working with established aerospace companies and recent AAM market entrants to understand the new risks and how they can be mitigated. The company has about a decade’s experience of providing insurance for UAS businesses, and this has given it a firsthand understanding of what Proudlove called “the growing pains” for a new sector, and how the new technologies have been developed and tested to be ready for use on a much larger scale.

“Much of the progress we are seeing today has been developed over time,” Proudlove said. “Some biofuels have been in use for over 10 years, for example. These types of risk are easier to assess than brand-new aircraft that are multi-rotor, battery-powered, and fully autonomous, for example.”

In the eVTOL space, Global is already insuring some of the start-ups and their test aircraft. Now, the company is preparing for the phase of AAM when the new aircraft will enter commercial service, in some cases with a vertically integrated business model in which the manufacturers are also the operators and support providers for their own fleets.

“We’re giving a lot of thought to this,” Proudlove explained. “It doesn’t necessarily change how insurance is provided, but there is clearly potential impact in destabilizing the status quo. But it’s a bit premature to assess this because we don’t yet know what the final operating model will look like.”

Part of the task in assessing the new AAM sector from a risk perspective is getting clarity as to the degree of cover that is appropriate. While existing airline operations generally have liability limits measured in billions of dollars, current commercial helicopter operators have much lower limits.

“We don’t yet know where the right balance is,” said Proudlove. “When assessing any risk, it is critical for us to understand the experience of the designers and engineers. We like to meet with companies so that we can really learn about how they will go about developing and testing the aircraft. We like to see a well-thought-out, progressive plan that aims to build up gradually. For automated aircraft, this typically involves thousands of simulated flight hours followed by a crawl-walk-run approach to actual flying conducted in a remote location.”

Many of the AAM pioneers—and especially start-ups eager to keep investors on board with the promise of an early revenue stream from passenger and cargo services—are pushing hard to fast-track their eVTOL aircraft into commercial operations. But, to inherently cautious insurance professionals, speed is not of the essence.

“I am sometimes surprised when I'm told that the builder of a new flying machine expects to be commercially operational in two or three years but that they haven’t begun the process of certification yet,” Proudlove commented. “Aviation is challenging, and it takes time to develop safe, reliable, sustainable, and certified aircraft. That said, most companies are focusing on either adding autonomous flight [capability] to proven aircraft or maintaining an onboard pilot on a new aircraft. To go the whole way in one step is a big ask.”

Part of the task for assessing risk and liability issues in the AAM sector involves making an objective assessment of how flying will change, especially in view of new concepts such as simplified vehicle operations (SVO) that exploit progress in fields such as artificial intelligence and machine learning. “There are big differences in the skills and proficiency required between an onboard active pilot and someone monitoring flights,” said Proudlove. “There are some interesting opportunities for the private aviation market to encourage flyers [to move] back into the industry, [ones] who may have been put off by increasingly onerous requirements to maintain safety.”

Overall, Global sees AAM as a very positive opportunity that will modernize the aviation sector on several levels. The company is taking a proactive approach to providing insurance cover for the new companies. “Some [insurers] will take a wait-and-see approach to see who reaches a proven level of safety, but really there is no reason insurance should be a barrier to this progress.”