Aerospace Quarterly Summer 2007 Newsletter
If you have questions or comments regarding this electronic publication, please contact John Averill, Vice President, Insurance Office of America at 800-535-4305, extension 2314 or john.averill@ioausa.com.
The IOA aerospace quarterly is produced by the aerospace division of Insurance Office of American (IOA). This newsletter is to provide insurance purchasers of professionally flown commercial and non commercial turbine/jet aircraft the prevailing insurance market conditions within the U.S. and International insurance market.
As reported last quarter, most underwriting companies are aggressively seeking to retain their preferred existing clients and to acquire new clients. The characteristics of the most desired operations include:
A. Professionally flown turbine/jet aircraft
B. A positive operating history
C. A demonstrated ability to successfully manage their operation
D. A positive loss history or how the operation has successfully addressed loss control.
As reported previously several of the underwriting companies will not quote older aircraft and still very conservative with single pilot operations. We are starting to see this not be the case any longer. Depending on the specifics of the individual insurance purchaser, the age requirement of the aircraft appears to waiver with the appetite of the underwriting company. Several insurance companies are now starting to quote aircraft that are in excess of 17 years of age.
The premiums in the aviation insurance market place continue to soften. Premium decreases from year to year largely depend upon the type of account and how aggressively it was priced the previous year. There seems to be no change in direction as to premiums. As part of the direction for the general aviation market place is derived from the airline market, more of the soft market story will unfold this fall during the heavy airline renewal season. Some airline insurance capacity is starting to pull back slightly and observe the market due to extremely soft market conditions.
Several underwriting companies are seeking higher limits capacity. There continues to be a surplus of reinsurance capacity in the market place.
As part of this newsletter, we feature a particular aspect of risk management or a non insurance oriented product that is also available in the market place.
Below you will find a portion of an article written by Stewart Lapayowker. Stewart is a partner is the law firm of Goldstein Lapayowker, LLP, Boca Raton, Florida. Goldstein Lapayowker, LLP assists clients with a variety of private aircraft matters, including aircraft purchases, sales, FAA regulatory matters and compliance, among others. Additional information about the firm can be found at www.bizavlaw.com.
Corporate Aviation Hurricane Policies – Another Form of Risk Management
When many hear the word “policy,” a vision of a political candidate stumping for votes or answering questions in broad (boring) strokes comes to mind. But a policy can actually be a useful tool, especially in the area of corporate aircraft. Many aircraft owners, especially public companies, are adopting utilization policies for their executives. These policies can also address the procedure to schedule the aircraft, the information that is required for the trip, and which executives, for business continuity reasons, should not travel together on the corporate aircraft.
Still other policies address very real risks to the aircraft and to the company with respect to natural disasters. Here in South Florida, it makes good sense to have a policy which addresses when the aircraft and company personnel should be relocated in light of an imminent risk of a hurricane. There would be several purposes for such a policy: (i) to ensure the safety and professional effectiveness of key personnel so interruption of business is minimized, (ii) to protect the aircraft, and (iii) to give you an argument that the transport of such personnel should be characterized as business-related and not “personal” from a tax perspective.
To build a corporate aviation hurricane policy, ask yourself a few questions:
- What will be the trigger for action? Being placed under a Tropical Storm watch or warning by the National Weather Service?
- Where should the aircraft be moved? Is there a location from which key personnel can effectively run the company (such as a satellite office or a subsidiary’s facilities?) Is there readily available and suitable hangar facilities?
- Is there an alternate location that will be satisfactory (in case the first location is compromised)
- Which management personnel will be authorized to accompany the aircraft? Will their families also be permitted to travel aboard?
- How will the company treat the trip with respect to the executive and the family members? Business vs. personal?
- How should the company handle a request by an executive to be flown to an alternate location?
Of course, every company has its own priorities and, of course, personalities, so policies dealing with issues such as natural disasters will, necessarily, be different. At a minimum, the institution of a clear, concise and practical policy, will facilitate communication and a unity of purpose between the flight department and the executive office.
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