The Genesis of Aviation Insurance
Aviation Insurance, of course, came about soon after the invention of the airplane and pilots who were trained during World War I continued to fly and to develop the air carrier industry.
The first policies were prepared by the underwriters of Marine Insurance and sold to individual aviators. The first attempts to regulate the nascent airline industry came in 1929 with the signing of the Warsaw Convention that outlined the terms of liability for carrying goods and people by aircraft. Within a few years the International Union of Marine Insurance created an Aviation Insurance committee that was initially joined by eight European insurance underwriters, Lloyd's of London being the foremost.
The nature of airline catastrophe is so monetarily emmense that no single insurer can underwrite a single policy for an airline. Instead, airlines carry several poicies from a variety of companies to cover the individual aspects of the risks of flying. The first of these aspects in damage to the airplane itself and is covered by an "All Risks" policiy. These policies cover the worth of the plane and come with hefty claim deductibles, such as 50,000 for a small aircraft to one million dollars for a conventional sized commercial airliner. The cost of these deductibles can be covered and paid for with separate deductaible insurance that is underwrittten by a different company. These policies do not eliminate the deductible entirely, but reduce them to about one tenth of the initial amount. Separate policies are required for coverage of cargo and are specific to each instance.
The All Risks policy referes to all physical loss due to damage to the plane but does not cover the economic losses encountered when a plane is grounded due to defect or for any other reason and cannot carry out scheduled flights. In this case, the All Risks policy will cover the repairrestoration of the aircraft to proper flying condition. Airplanes can be grounded by the ailine or by the the Civil Aviation Authorities.
An example of this occurred in the 1980's when authorities of several nations together grounded all DC10 airplanes, after several accidents occurred involving this type of aircraft. Redgardless of the condiditon of individual planes, all crafts were grounded until the underlying defect was found and corrected. The airlines suffered hugh financial losses, both becauase of the accidents and also due to the loss of use of these expensive airplanes. Much of this loss was in turn handed over to the aircraft manufacturer, McDonnell Douglas of Long Beach, California, which became defunct and was bought by Boeing Aeronatics.
by Sally.Anderson 19 years ago