Airclaims
Global Reach
Local Presence
Rapid Response
Adding Value - An Insurer’s
Viewpoint
David Hitchen
Aviation Surveyor
Maintenance Related Claims…..
Setting the Scene
• Insurance for aircraft maintenance activities:
• Hull All Risks Policy – taken out by airline to cover physical
hull damage.
• Hangar-keepers Policy - taken out by MRO to cover for
physical damage to aircraft when under their care custody &
control.
• Products Policy – taken out by MRO to cover for physical
damage to aircraft when in service – resulting from a
maintenance error.
• Contract wording essential in establishing liability.
• Policy wording essential in establishing coverage.
The Current Market-place
• Downwards pressure on premium rates continues
• Due mainly to reducing worldwide loss levels
• Also a result of increased competition within Insurance
Markets both in London (still the largest market) and
overseas due to increased capacity worldwide.
• Insurers exposure increasing
• Average fleet value increasing.
• Maintenance activity levels at MROs increasing globally in
line with the expansion of commercial aviation and a growth
in outsourcing – increase in Low Cost Carriers.
Airclaims’ Role in Market
• Essentially providing technical expertise to
Insurance Market using a worldwide team of 50
plus surveyors.
• Majority of work relates to technical handling of
insurance claims on all aircraft types – from minor
ramp handling incidents to total losses.
• Additionally undertake risk survey activities for
Insurers on Operators, Maintenance Organisations
and Airports.
• Provide technical expertise to Aviation Lawyers in
support of legal subrogation activity.
Safety Management Systems – Insurance
Implications.
• Aviation is highly regulated in most parts of the
world with safety being a critical consideration.
• Insurers assessment of a particular risk covers
many aspects of the organisation in question:
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Operational Environment
Facilities.
Activities.
Structure and management philosophy.
Previous loss records – number / cost.
Future planned activities – expansion etc.
Safety Management Systems – Insurance
Implications cont…
• Relevant Factors
• Market conditions – supply & demand
• Historical relationship – e.g. value of established ties
between Insurer and Insured
• Existence and maturity of a Safety Management
System.
• The SMS will not in itself attract a lower premium.
• More likely to have an effect on the premium when
considered within the entirety of the risk.
Practical Experience – A Case Study.
• The risk in question, an MRO, was in the process
of Policy renewal with 2 consecutive years with a
high number of claims.
• MRO had been taken over by a new company who
wished to include the risk in their current policy.
• Insurers in question were concerned about the loss
record of MRO however had a long historical
relationship with parent company.
• Airclaims were commissioned to undertake a Risk
Survey of the MRO to provide reporting to Insurers
and parent company.
Claims History
• Numerous (in excess of 20) small attrition type
claims which amounted to approximately US$3.5M
of losses over 2 year period.
• 2 substantial losses with safety implications one of
which was an engine fire on take-off that the on
board extinguishers failed to contain, second was a
thrust reverser cowling failure on landing. Both
related to maintenance errors. Combined cost of
these two claims alone US$3.8M.
The Serious Side ….In Flight Events.
Original Company Structure
• Traditional Airline Engineering department that had
developed into an MRO.
• Airline accounted for 80% of workload for many
years.
• Safety maintained along lines of old style Quality
Department with Regulatory Audits.
• No Safety Management System and gradual
reduction in investment through cash flow issues
leading to low morale.
Regulatory Audits.
• Tended to be very focussed on certain process
issues but did not address the big picture.
• Partly a box ticking exercise albeit they did raise a
number of non-conformances that were addressed
by MRO.
• Aircraft damage issues were not generally seen as
airworthiness problem as defects all rectified and
certified correctly therefore safety not considered to
be affected.
• More serious losses were investigated by
authorities with recommendations being made.
New Management
• The parent company appointed a new
management team.
• Turning the business around from a commercial
point of view extremely important for long term
security of organisation.
• This commercial vision had safety and SMS at its
heart as the moral and business benefits were
clearly understood by new owners.
• Reducing loss record and hence premium seen as
essential.
Risk Survey
• Undertaken over 7 day period at MRO’s two key
business centres.
• Planned, pre-arranged survey gave management
team an opportunity to assess and address many
key issues prior to site visit.
• Risk survey and policy renewal seen as a prime
instigator in improving processes from a safety
point of view.
• Meeting held with workforce prior to survey to
explain the business imperative to improving
safety.
Survey Process
• Intention of survey is not to replicate regulatory
audit.
• Look at big picture issues regarding management
structure, facilities, culture and safety initiatives.
• In depth review of critical processes, particularly
training and qualifications, safety awareness,
health and safety and production/capacity control.
• Access to highest level management and freedom
to alter survey schedule as required.
• Feedback presentation at end of survey.
Survey Report
• Survey Report including key recommendations
submitted.
• Report designed to accurately reflect state of
organisation highlighting both positives (SMS etc)
and any negatives.
• Provided a datum for future assessment of
organisation particularly in response to
recommendation.
• Gave Insurers an independent assessment of the
organisation, confirming the effectiveness of safety
initiatives being implemented such as SMS.
Conclusions
• The involvement of Insurers in assessing the
business activities of the organisation reinforced
the already instigated safety initiatives.
• Using the Insurers and hence the financial
viewpoint added strength to the message being put
to the MRO’s production staff in addition to
confirming the Management’s commitment.
• Tangible results have been seen in a dramatic
reduction in claims, only 2 in 9 months.
• Involvement of Insurers contributed to improved
safety culture and processes within organisation.
Thank you
for listening
The information used in this presentation has been assembled from many sources, and whilst the utmost
care has been taken to ensure accuracy, the information is supplied on the understanding that no legal
liability whatsoever shall attach to Airclaims Limited, the Airclaims Group Holdings Limited, its subsidiaries,
their officers, or employees in respect of any error or omission that may have occurred.