Although the improvement in the aviation sector’s safety record – particularly with regards to the number of fatal accidents – cannot be questioned, it continues to see a high volume and growing magnitude of insurance claims, meaning aviators and insurers alike cannot be complacent. More costly repairs and engine claims, damage from foreign objects, ground collision incidents, slips and falls, fleet groundings, mis-fueling incidents, and liability awards, are just some of the areas in which insurers are seeing heightened activity. In recent years, the number of dollars paid in claims outstrips total insurance premiums in the aviation sector.
AGCS analysis of more than 50,000 aviation insurance industry claims worth more than €14.8bn ($16.3bn) over the past five years shows collision/crash incidents account for over half the value of all claims (57%) equivalent to €8.4bn ($9.3bn) – and over a quarter by number (27%). Loss of control in flight is the most frequent cause of fatal accidents. Collision/crash claims also incorporate incidents such as hard landings, bird strikes and runway incidents such as incursions and excursions. The analysis shows there have been 470 runway incidents resulting in claims over five years causing over €800mn ($883mn) of damages. The average runway claim totals around €1.7mn ($1.9mn).
Increasingly sophisticated aircraft are also contributing to more expensive claims. In particular, more complex engines and, in some cases, composite materials – such as carbon fiber layers bonded with resin which are strong and light and help improve fuel efficiency – can be costly and more time-consuming to repair. More and more aircraft are using composite materials and significant damage is more expensive to repair than in traditional metal alloys.
The increasing complexity of aircraft design, technology and manufacturing is also leading to more costly grounding incidents, involving entire fleets, as in the case of the Boeing 787 Dreamliner in 2013, following electrical system problems stemming from lithium-ion batteries, and more recently following two fatal crashes involving the redesigned Boeing 737 Max within five months in 2018 and 2019. It is reported Boeing has put aside at least $5bn to cover costs related to the global grounding of the 737 Max [1]. Such incidents highlight the challenge in finding technical solutions to complex problems, which increases the time it takes to get grounded aircraft back into operation. Even after a fix is found, the task of retrofitting a fleet takes considerable time. Civil aviation and airline safety authorities have grown increasingly cautious and rightly so. However, this will likely result in more, and longer, groundings of aircraft in future.