- Numbers of unmanned aircraft systems (UAS) to surge as they become smaller and cheaper
- Innovative technology can accomplish menial or dangerous tasks but also raises safety concerns such as risk of collision, a terrorist attack or cyber incident
- Systematic registration of UAS and robust education and training of operators necessary to ensure safe skies, as reports of near-misses increase
- New risk environment to spur growth in fast-developing “drone insurance” market, which could be worth $1bn in the next decade
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Whether used commercially for industrial inspections, aerial photography, border patrol, emergency deliveries and crop surveys or recreationally by millions, drones or unmanned aircraft systems (UAS) have the potential to become a multi-billion dollar business and deliver problem-solving technologies across numerous industries. However, more drones in the skies also raise a number of new safety concerns, ranging from collisions and crashes to cyber-attacks and terrorism. To ensure safe UAS operations, systematic registration of unmanned aircraft and robust education and training of operators is necessary, according to a new report from aviation insurer Allianz Global Corporate & Specialty (AGCS): Rise of the Drones: Managing the Unique Risks Associated with Unmanned Aircraft Systems.
“There have already been enough incidents and near-misses to date involving UAS to generate concern that the likelihood of collisions and other loss events will grow as numbers multiply,” says James Van Meter, an Aviation Practice Leader at AGCS.
Made for menial or dangerous tasks
Mid-air collisions and loss of control core safety concerns
However, new risks and the potential for misuse of UAS technology need to be considered, too. UAS raise two priority safety concerns: mid-air collisions and the loss of control. A mid-air collision could happen if the pilot cannot see and avoid manned aircraft in time, especially those that normally fly below 500 feet, such as helicopters, agricultural aircraft and aircraft landing or taking-off. Reports of UAS sightings from pilots, citizens and law enforcement have increased five-fold over the past year in the US; while there have been a number of near-miss incidents around the world including in China, Dubai, and the UK.
Loss of control can result from a system failure or if the UAS flies beyond signal range. AGCS sees a major risk in loss of control from frequency interferences and other factors. A pilot losing control of a UAS during a building inspection could result in a total liability easily in excess of $5 million, if the UAS crashed into a truck or shop, for example. Even a small UAS could cause as much as $10 million in damage alone when hitting an engine of an airplane. An emerging peril is the potential terrorist threat from UAS targeting critical infrastructure such as (nuclear) power stations or live events. Other scenarios include hackers taking control during a flight, causing a crash, or hacking the radio signal and transmitting valuable recorded data from the aircraft from another control station (“spoofing”). There are also many public concerns over UAS around privacy issues.
Improving UAS safety: need for training and registration
A primary concern is the lack of consistent standards or regulations for the safe operation of UAS around the globe. “In many locations, there are few or no pilot training and maintenance standards,” explains Van Meter. “In addition to regulation, education will continue to be key to ensuring safe UAS operations.” Training has a crucial role to play in reducing the risk of an incident occurring, with novice control a major cause of loss activity. Training should include meteorology, emergency instructions, air traffic law, including flight rules over buildings, system maintenance, flight time calculation and on-board camera image use.
In many locations around the world no registration of UAS is mandatory, effectively affording the user anonymity in the event of a loss incident. “However, in future, identification of both UAS and operator will be essential to maintain proper liability in general,” says Kriesmann. “Introduction of car registration-style schemes will be needed sooner or later.”
“Drone insurance” for multiple exposures
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About Allianz Global Corporate & Specialty
Allianz Global Corporate & Specialty (AGCS) is a leading global corporate insurance carrier and a key business unit of Allianz Group. AGCS provides risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 12 dedicated lines of business.
Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are the world’s largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film actors. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience.
We constantly strive to deliver the best for our customers through our global team of around 4,400 employees from over 70 nationalities in 34 countries worldwide. As the one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial strength ratings and a global network in over 200 countries and territories. In 2018, AGCS generated a total of €8.2 billion gross premium worldwide.