Top tips for first-time business jet buyers (Insurance aspects)

March 23, 2022

On 23rd March 2022 Marine Insurance Services SIA Branch in Spain representative Juris Zacs participate in the conference “Opportunities in Business Jets” organized by “Quaynote” taken place in Malta. He participated in the panel discussion to talk about top tips for first-time buyers from an insurance aspects point of view.

Juris has almost 20 years of insurance brokering experience and more than a decade of working with Marine Insurance Services to develop general and business aviation solutions for the aviation industry. He has been a key person for many business jet owners and operators helping successfully to place adapted insurance programs with well know and reputed insurance companies across the globe.

There were many aspects he spoke about to underline the newest trends from the insurance broker’s point of view whilst working closely both with insurers and owners.

The panel discussion included the following topics Juris has been talking about:

When is the best time to start considering insurance?

When buying or considering to by an aircraft, shopping for insurance cover should come sooner than later, due to the complex aviation insurance situation it is becoming much more work full and time capacity to obtain insurance quotes. The current global situation overall requires a deeper compliance check for the insurers and brokers which can take much more time for the study.

What are the key factors important for the insurers?

• KYC (Know Your Client) and risk safety pre-work is the initial importance to identify the risk factors, understanding if the insurer can offer terms for the exact parties, aircraft and operations, nowadays this process takes the most time before calculating the premium levels.
• From risk underwriter perspective, time and information matter, maximum complete information accommodated by a reasonable time for the study is one of the key factors nowadays.
• Less we know, higher the insurance premium would be – so simply the underwriter will calculate from the risk study.

When we talk about relocation and ferry flights by accepting the recently purchased aircraft, it is already demanded to have the cover in place. In some cases, the aircraft is being grounded after the ferry flight, however, insuring one ferry flight and then afterwards going after an annual policy for the normal operations is quite expensive because the one flight cover is subject to minimum lump premium level and not economically the best solution for the owners. The best solution is to go straightforward to annual policy by the inception to start with Ground risk cover, however, including ferry flight, afterwards to turn the Ground risk cover into Full Flight risk cover when the normal operations could be started.

Individual policy purchased by the owner vs joining the operator fleet cover? Two sides of tis advantage: 

[i] individual policies for one aircraft might be more expensive, the insurance rates for one or ten aircrafts will not be the same; however

[ii] if the fleet has some previous loss records, it will be taken into consideration for the general premium increase for every single aircraft.

In any case, insurer will feel more convenient with fleet policies which are more common for AOC, smoother to manage and administrate the insurance cover, adapting the terms, adding and deleting the coverages etc. On insurance renewal is much easier to discuss the renewal terms by improving and adapting the requirements with possibilities, a pure flexibility from the insurer point of view.

What do the owners and operators need to know about the aircraft insurance?

First of all, the mutual understanding of insurance contract is very essential not even receiving a proper and adapted cover, but as well administrating the insurance during the period.

Reviewing the documentation together with brokers – since the broker normally create the policy wording, the adaption is at first stage generated from the operations involved and on the second stage augmented presentation is being presented to the risk underwriters.

When comparing and selecting an insurance company, where to pay attention:

[i] checking if the proposed insurers have international credit ratings and demonstrating a sufficient financial stability,

[ii] positive and practical references both on policy admin processes and on claims handling processes (some of the insurers have their own inhouse claims adjusters and some are outsourcing – insurers approach claims adjustments differently),

[iii] the level and structure of the deductibles offered, is it reasonable for the type of aircraft,

[iv] the main paragraph of any insurance agreement is the EXCLUSIONS section which affect and limit the actual operations of the aircraft,

[v] are all pilots covered under the policy who fly the aircraft,

[vi] are all financing and leasing companies properly listed in the policy for their legal rights and interests, if the lessor requirements stipulated in the cover,

[vii] does the cover include any beneficial extensions as premises liability, replacement of the aircraft during the claim etc.

What are the current global aspects affecting the aviation insurance industry?

The current aviation insurance market changes indeed affect a lot of industry “players”, the mix of all global aspects purely affect insurance risk underwriters to adapt the situation – the capacity of insurers have lowered significantly during past last years.

Nowadays insurers more focus on aircraft operations, typically aircraft type, registration and domicile, these now are the key factors for selecting insurance markets to work with, nowadays more frequently the operation side has to be studied, like geographical scope of operations, typical routs and destinations etc.

Typical declinations from the Underwriters which needs to be underlined once presenting risk information: 

[i] pilot experience details (min requirements even at the early beginning – incl. extensive information about the trainings and safety compliances).

[ii] expected insurance premium level is below the possibilities of the insurers.

[iii] too extensive insurance wording requested from the market which is not anymore so common comparing to the years before.

What to do if insurers one by one is declining to offer terms?

The key point is a professionally and properly organized risk presentation for the insurance markets for their internal review, however, still all aspects are subject to insurers possibilities, guidelines and capacities. Nowadays we don’t see so much competition anymore between insurers to get the risk insured but partial participation is more common concept to place the risk by participating more insurers on one insurance placement. Logically lower risk for each insurer and being together with other insurers is a very powerful approach.

Increase on renewal premium level terms (case on case accounts) currently the market situation demonstrates increase in the premiums almost for all accounts, both new agreements and renewals.

What is the role of the insurance broker at the safe side?

[i] Closer connection to brokers and operators, flight planning crew and management to analyze charter flights, normally the insurers will consider accepting the flights to typically excluded regions only with the proper information upfront like number of pax each way, international airports used and time on ground.

[ii] The broker is a connector between insurers and their clients, since on daily basis the exchange of correspondence is being carried out and professionally addressed both ways. Here is very important to maintain as well a mutual meetings between insurers and insureds for introducing in person, for risk underwriters to understand the client operations in action which typically avoid doubts when the specific planning tasks needs to be discussed, by giving a mutual trust each other.

[iii] Insurance broker is not only the intermediary between the insurance companies and the policy holders, in fact broker is the first independent advisor with helping hands finding solutions for “To Do” tasks, e.g., whilst there is a “red” light for a specific insurer or regional insurance market, there might be someone out there considering the different risk analysis.

Example: when selecting insurance company and the programs, there are always a geographical aspects underwriters would like to understand where owners and operators plan to fly, however, these cannot be fixed as flight plans always can be changing. If the insurer considers typical routs and destinations to be announced and agreed prior to entering the risk, what if a charter request comes to the regions where a special approval from the insurer has to be received to grand the cover?

[iv] Messaging platforms linking together operations with insurance advisors, the day-to-day work benefits.

[v] Claim monitoring from broker side, managing actions taken and planned, closely working with surveyors and coordinating information exchange to allow owners and operators up to date with the developments.

[vi] Broker can offer an independent consultancy from a neutral and market knowledge point of view.

It was a great experience and honor to participate the conference and give an input to the very interesting topics, thanks to the professional market leaders there, it has been a very knowledge-full event and we all definitely are looking forward for the further conferences to attend.