Aviation Insurance - The Middle East
The Middle East and the surrounding region is experiencing rapid economic progress underpinned by a growing young and educated population, and increased financial stability. This has put increased pressure on the time and efficiency of businesses and individuals - reflected in the demand for private aviation, both general and corporate segments.
Furthermore, from the general aviation industry's standpoint, at a global level, improved aircraft engineering and design i.e. product innovation (such as integrated glass panel avionics, synthetic vision systems, airborne de-ice systems, advanced light weight & efficient engines, etc.), improved safety systems, better fuel efficiency, environmentally friendly take-offs, quieter engine technologies, supersonic civil applications, etc., have all contributing to more economical, and affordable usage of business jets.
The Middle East, with Dubai in particular, is all geared up for an expanding general aviation focus and marketplace, as highlighted below.
- Dubai is leading the way in providing world-class facilities for business aviation with a dedicated Executive Jet Centre at Dubai World Central, the urban community taking shape in Jebel Ali some 30 kilometres from Dubai city center
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Jebel Ali Airport City, an aviation-related free zone, is to be built next to Jebel Ali seaport and free zone at a cost of Dh30 billion, with one customs bond for the whole area.
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At the last MEBA in 2005, the region's business aviation fleet numbered 250 - it now stands at over 300 (est.).
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The Middle East's business jet market is estimated to generate revenues of Dh376 million ($102 million) per year, according to Winsome Resources' Aircharter Guide.
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The region's charter airline business will double over the next five years and account for 40% of the total aviation market in the region.
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In the Middle East, business aviation activities are growing at approximately 11% a year
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Middle East Business Aviation Show will alternate yearly with the Dubai Airshow (which is held every 2 years) - this means that the Dubai will now annually host an international aerospace event!
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A report just out by IATA shows the Middle East topped the global aviation industry's growth chart last year with a 13.1% increase in passenger traffic - some 5.5% higher than the global average.
Air Shows, Conferences & Summits in the region include:
- 2008 Middle East Business Aviation Conference & Exhibition
Nov. 23-25, 2008, Dubai, UAE
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2008 Aircraft Interiors Middle East
June 16-18, 2008, Airport Expo, Dubai, UAE
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2007 Dubai Air Show
11 to 15 November, 2007, Dubai International Airport, Dubai, UAE
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2007 Airport Build & Supply
28 to 30 May 2007, Dubai - Airport Expo, Dubai, UAE
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2007 Very Light Jets Summit
23 & 24 April 2007, Dubai - Habtoor Grand Resort & Spa, Dubai, UAE
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2007 Aero India
February 07-11, 2007. Yelahanka Air Force Base, Bangalore, India
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2007 Middle East Business Aviation Show & Conference
31 Jan to 1 Feb 2007, Dubai - Airport Expo, Dubai, UAE
Aviation Insurance History
Aviation Insurance was first introduced in the early years of the 20th Century. It is not known who wrote the very first aviation insurance policy though there is evidence that early aviators did purchase limited amounts of coverage.
It is believed that the first aviation polices were underwritten by the marine insurance Underwriting community.
In 1929 the Warsaw convention was signed. The convention was an agreement to establish terms, conditions and limitations of liability for carriage by air, this was the first recognition of the airline industry as we know it today.
By 1933 realising that there should be a specialist industry sector the International Union of Marine Insurance (IUMI) set up an aviation committee, and by 1934 eight European aviation insurance companies and pools were formally established and the International Union of Aviation Insurers (IUAI) was born.
The London insurance market is still the largest single centre for aviation insurance. The market is made up of the traditional Lloyds of London syndicates and numerous other traditional insurance markets.
Throughout the rest of the world there are national markets established in various countries, this is dependent on the aviation activity within each country, the US has a large percentage of the world's general aviation fleet and has a large established market.
No single insurer has the resources to retain a risk the size of a major airline, or even a substantial proportion of such a risk. The Catastrophic nature of aviation insurance can be measured in the number of losses that have cost insurers hundreds of millions of dollars.
Based in Dubai and serving the region, Greenshield is in a very unique position to offer comprehensive yet competitive priced insurance to private and corporate clients for their jets. We have excellent relationships with other brokers in the UK and the US, as well as with underwriters.
Below is an outline of the various risks we can cover in the aviation space:
1. Hull "All Risks"
The hull "All Risks" policy will usually refer to something like "all risks of physical loss or damage
to the aircraft from any cause except as hereinafter excluded". Airline hull "All Risks" policies are subject to a standard level of deductible (that is an uninsured amount borne by the Insured) applicable in the event of partial (non-total) loss.
What the policy will cover is the reinstatement of the aircraft to its "pre-loss" condition, if repairable damage is involved, or some other form of settlement in the event that more substantial damage is sustained. Exactly what form of settlement will depend on the policy conditions.
Today, the vast majority of airline hull "all risks" policies are arranged on an "Agreed Value Basis". This provides that the Insurers agree with the Insured, for the policy period, the value of the aircraft and as such, in the event of total loss, this Agreed Value is payable in full. Under an Agreed Value policy the replacement option is deleted.
Available Coverages Include:
Policy Features and Options Include, But Are Not Limited to:
- Insurance for Physical Damage (Hull Coverage) to private, corporate and commercial aircraft, including helicopters
- Liability Coverage for the owners and operators of theseaircraft
- Medical Coverage for passengers, pilots and crew members
- Voluntary Settlement Coverage
- Non-Owned Aircraft Liability and Medical Coverage
Policy Features and Options Include, But Are Not Limited To:
- Geographic limits extended to cover where you fly
- Approved Aircraft Use to cover how you fly
- Deductibles to fit the risk
- Airport Premises Liability
- Premises Medical Coverage
- Ground Hangarkeeper's Liability Coverage
- Cargo Liability
- Emergency Expense Reimbursement
- Coverage for Non-owned Hangars and their Contents
- Coverage for Personal Effects and Baggage
- Trip Interruption Expense Coverage
- Coverage for Spare Engines and Parts
- Extra Expense Coverages
- Coverage for Other Aircraft, Substitute Aircraft and Newly Acquired Aircraft
- Diminution of Value Coverage
- War Risks Coverage to Satisfy various International Requirements
Exclusions1
- Wear, tear and gradual deterioration - in common with most non-marine policies these perils are thought to be a trading expense and not a peril to be insured.
- Ingestion damage - caused by stones, grit, dust, sand, ice, etc., which result in progressive engine deterioration is also regarded as "wear and tear and gradual deterioration", and as such is excluded. Ingestion damage caused by a single recorded incident (such as ingestion of a flock of birds) where the engine or engines concerned have to shut down is not regarded as wear and tear and is covered subject to the applicable policy deductible.
- Mechanical Breakdown - likewise is thought by aviation insurers to be an operating expense, but subsequent damage outside the unit concerned is usually covered. However, it is possible to obtain insurance coverage against mechanical breakdown of
engines by way of a separate policy. This coverage has a high degree of exposure and as a result is relatively expensive.
1.1. Hull War Risks
The hull "All Risks" policy will contain the exclusion of "War and Allied Perils". Generally speaking, throughout the aviation insurance world, "War and Allied Perils" have a defined meaning. In the London Aviation Insurance Market the standard exclusion is called the War, Hi-jacking and Other Perils Exclusion Clause (currently known by its reference - AVN48B for short) this lists and defines these so-called war and allied perils.
War Definition
- War - this includes civil war and war where there is no formal declaration.
- The detonation of a weapon of war employing nuclear fission or fusion.
- Strikes, riots, civil commotions and labour disturbances.
- Political or terrorist acts.
- Malicious or sabotage acts.
- Confiscation, nationalization, requisition and the like by any government.
- Hi-jacking or any unlawful seizure or exercise of control of the aircraft or crew in flight.
The exclusion also applies to any loss or damage occurring whilst the aircraft is outside the control of the operator by reason of any of these "war" perils.
The majority of the excluded "War and Allied Perils", other than the detonation of a nuclear weapon and a war between the Great Powers (the aviation insurance world identifies these as the U.S.A., the Russian Federation, China, France and the UK), can normally be covered by way of a separate "War and Allied Perils" policy. Aircraft deductibles are not normally applied in respect of losses arising out of "War and Allied Perils".
Other exclusions insurers will usually apply are, as follows:
- Confiscation etc. by the "state" of registration (this exclusion can often be deleted in respect of financial interests - albeit, in some instances at an additional premium charge);
- Any debt, failure to provide bond or security or any other financial cause under court order or otherwise;
- The repossession or attempted repossession of the Aircraft either by any title holder or arising out of any contractual agreement to which any Insured protected under the policy may be party;
- Delay and loss of use. (Although there is often an extension to the policy for a limited amount for extra expenses necessarily incurred following confiscation or hijacking).
The aircraft hull "War and Allied Perils" policy will cover the aircraft on an "Agreed Value" basis against physical loss or damage to the aircraft occasioned by any of these perils. This statement is made carefully and deliberately in order to highlight the essential difference from a "Political Risks" Insurance.
1.2. Political Risks
Non-repossession of Aircraft insurance protects a company against the refusal or failure of a host country government to allow the company to enforce its right to repossess aircraft or otherwise take possession of and/or sell aircraft pursuant to the terms and conditions of a lease agreement.
2. Spares
Spares are usually insured in one of two ways. Either under a "spares" section of a hull policy or by a separate Spares Policy. In either case the scope of coverage will probably be similar. All Risks whilst on the Ground and in Transit for a limit of [so much] any one item or sending or any one location.
War Risks can also be covered (in respect of transits), Strikes, Riots, Civil Commotions can be covered in accordance with standard market clauses. Spares coverage is usually subject to a small deductible except, however, in respect of ground running of spare engines when the appropriate Ingestion deductible will be applied. Spares are normally covered on an agreed value basis - usually their replacement cost (be it new or reconditioned - as is required).
3. Liability Insurance
Liability can be divided basically into two categories:
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Liability in respect of Passengers, Baggage, Cargo and Mail carried on the aircraft. These liabilities result from the operations the airline is set up to perform and are normally the subject of a contract of carriage like a ticket or airway bill, which provides some possibility of limiting the airline's liability.
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Aircraft Third Party Liability - the liability for damage done to property or people outside the aircraft itself.
Every airline will arrange liability insurance for these two categories, normally in a single liability policy. In many countries there are requirements laid down imposing minimum limits of liability that are a prerequisite to obtaining an operator's licence. Elsewhere limits are specified for an aircraft to be allowed to land. The size of limit required is often related to the size of the aircraft concerned (and its potential for causing damage). A small aircraft operating only in remote regions and using small airstrips incurs considerably less potential exposure than an aircraft flying into and out of major airports.
4. General Liabilities
The other category of liability covers premises, hangerkeepers and products liability and is called " Airline General Third Party" - being the liability for damage done to property or people arising from other than the use of aircraft. Many airlines cover their "Airline General Third Party Liability" within their main liability programme.
5. Agricultural Aviation
Complete aircraft hull, and chemical drift liability coverage for all areas of aerial application including crop, forestry and mosquito control. Additionally, aerial applicator's premises liability can be provided.
6. Aviation Products Liability
Manufacturing and Special Risks (Including Grounding) Manufacturers, Modifiers, Repairers, Suppliers This type of insurance is designed to protect manufacturers of aviation and aerospace products (airframes, engines, avionics and other components) against claims resulting from an accident caused by faulty design or workmanship. The coverage also benefits providers of certain aviation services such as maintenance and repair facilities.
Greenshield & Aviation Insurance
Greenshield is an established regional broker based in Dubai. Due to our unique location and access to the Middle East, the Levant, Iran and the Indian sub-continent, we are able to offer timely response to your aviation insurance needs. We have excellent relationships with underwriters, both at Lloyds (UK) and the United States, and are able to offer comprehensive covers at competitive premiums.
We also represent Lance Toland & Associates, who is based in Georgia, USA and is the largest
independent aviation insurance broker in the nation.
For enquiries and quotes, please contact:
| M Ishtiaq Ali |
Tel: |
+971-4-3974464 Ext 204 |
Mobile: |
+971- 50-4590573 |
Email: |
ish@greenshield.ae |
Disclaimer:
Information presented herein has been summarized and is not exhaustive. Each aviation risk and insurance cover / policy will differ and has to be addressed on a case to case. Readers are therefore cautioned not to take information contained herein as complete and fully reliable.
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Member of Middle East Business Aviation Association |
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