Aviation safer, but claims and risks grow – Allianz study

Insurers are facing more costly claims in aviation for collisions, groundings and aircraft repairs, even though there have been fewer fatal accidents.

That’s according to aviation insurer Allianz Global Corporate & Specialty (AGCS). In a new report Aviation Risk 2020: Safety And The State of The Nation, produced in partnership with Embry-Riddle Aeronautical University.

More costly repairs and engine claims, damage from foreign objects such as bird strikes, 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 loss activity, says the report.

“Thankfully, fatal air accidents involving the modern generation of commercial aircraft are now infrequent and the past few years have been among the safest ones in aviation history,” says Tom Fadden, global head of aviation at AGCS. “However, the headline improvements in safety shouldn’t lull the aviation industry into a false sense of security. The sheer volume and magnitude of aviation losses is often underestimated – at any time Allianz alone will handle thousands of claims and be it grounding incidents or collisions with drones – there are also many new risks on the horizon which airlines, manufacturers and airports have to prepare for.”

The report, which analyses more than 50,000 aviation insurance industry claims worth more than €14.8billion ($16.3 billion) from 2013 to 2018[, reveals that collision/crash incidents currently account for over half the value of all claims (57 percent) equivalent to €8.4 billion ($9.3 billion) – and over a quarter of claims by number (27 percent). In future, more costly grounding incidents, business interruption incidents resulting from cyber and drone events, and more incidences of turbulence are just some of the trends expected to have an influence on the loss landscape, the report notes.

“Overall, aviation insurance claims are increasing in frequency and severity driven by higher values of aircraft, increased repair costs and rising liability awards for crash victims,” says Dave Warfel, regional head of aviation, North America at AGCS. “The volume of claims is also a reflection of growth in air transport, with increased passenger numbers and more congested airports, as well as growing demands on airlines, manufacturers and ground services.”

The report also notes that liability claims per passenger are increasing with many US plaintiff attorneys seeking higher awards. With potential awards per passenger in the millions of dollars, a major aviation crash could subsequently result in a liability loss of $1 billion in future. Insurers are also seeing a higher level of foreign object damage claims. There were more than 14,600 reported airplane collisions with wildlife in 2018 in the United States alone, according to the US Federal Aviation Administration. In particular, bird strikes are a notable contributor to claims globally with the average claim costing around $360,000. Some can cost as much as $16 million. In addition, mis-fueling claims are also increasing. Mistakes by ground crews can result in costly engine damage and repairs and lengthy groundings when fuel systems have to be replaced, but can also have catastrophic consequences, potentially causing jet engines to shut down in flight.

The report also highlights the ongoing decline in the number of fatal accidents over the past 60 years – a period when passenger growth has increased significantly. Between 2008 and 2017, there were 2,199 fatalities from 37 commercial passenger jet fleet events globally – less than 8 percent of the total number since 1959[2]. In 2017, for the first time in at least 60 years of aviation, there were no fatalities on a passenger jet flight. 2018 ranks as the third safest year ever with 2015 ranked second.

The continuous improvement in aviation safety can be attributed to a number of factors. Safety systems and cultures have improved enormously. Design implementations have had a dramatic impact on accident rates, including aerodynamic and airframe improvements, fail-safe design criteria, improvements to cockpit instrumentation and the increasing number of fly-by-wire controlled aircraft in operation.

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