AAIRRG | Aviation Alliance Insurance Risk Retention Group, Inc.

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Printer-Friendly VersionTHE HISTORY OF AVIATION INSURANCE

To learn about AAIRRG's history, please refer to our Home page

The first aviation insurance policy was written by Lloyd's of London in 1911. The company stopped writing aviation policies in 1912 after bad weather and the resulting crashes at an air meet caused losses on many of those first policies. Since then the majority of aviation's insurance has been concentrated within just two insurance pools.  Think of it, over 50% of all U.S. aviation was and is still written by either USAIG or AAU. In 1932, the New York Department of Insurance commenced an investigation regarding this concentration and, again in 1958, Congress also commenced an investigation into the aviation marketplace. The intent was to break up the cartel, much like Standard Oil a decade or so before.

The industry dodged the bullet by appointing a "committee" to work with first with New York Department of Insurance and then later with Congress, but that went away when Congress passed The McCarran-Ferguson Act which turned regulatory control of the insurance industry over to each individual state and exempted insurance from anti-trust laws to boot. (This exemption is enjoyed by only a few other "activities" such as unions, baseball and newspapers.)

Of course, the states resolved the issue by decreeing that aviation was an unregulated line of insurance, which means there is minimal oversight. To give you an example of just how incestuous the aviation industry is, more than half of all insurance regulators come from the industry and, after serving a period of time as a regulator, return to the insurance industry — typically in a more exulted position than when they left. Talk about the "fox guarding the hen house."

If this was any industry other than insurance, the Justice Department would be having a field day in court with these scoundrels facing more prison time than Bernie Madoff!

The result of all this is that aviation in the United States is the first or second most profitable line of liability insurance just before or after surety (principally, performance and completing bonds). All other liability lines would be delighted with an 80% loss ratio (percentage of dollars paid out in claims from premiums paid) whereas aviation has averaged in the mid 50% range for the past twenty plus years. That's thirty points more profit than the average!

Of course, over the years, other insurance providers have tried to break the cartel, but each time, the cartel has driven them out of business by savagely cutting prices until the new competitor fails and then they predictably revert back to their old ways.

The reason that AAIRRG is thriving is that, with few exceptions, each new aviation marketing effort in the past have been 'generalized' whereas AAIRRG is exclusively focused on certified Part 145 repair stations. Please read on to learn why repair stations are a much safer risk than FBO's, charters, flight schools, firefighting, etc. This is the "miscellaneous" aviation class of business that repair stations have been lumped in with. So in effect, all these years, you have been subsidizing "others" with your enviable low rate of claims.

 

Resource: Introduction to Aviation Insurance & Risk Management, second edition, Alexander T. Wells and Bruce D. Chadbourne, authors

 

 

NCAA suspends Bristow's aircraft, SikorskyS-76C++
02-04-2016: The Nigerian Civil Aviation Authority, NCAA, on Thursday suspended Bristow Helicopter's aircraft type SikorskyS-76C++ from further operations in Nigeria due to the successive mishaps of the said aircraft type on the coastal waters of Lagos.
Pilots say FAA bill is 'unsafe' without lithium battery ban
02-03-2016: The union that represents pilots in Washington said Wednesday that a proposed funding bill for the Federal Aviation Administration is "unsafe" because it does not include a ban on shipping lithium ion batteries by air.
FAA overhaul battle heats up
01-26-2016: GET READY TO RUMBLE: It might be another couple weeks before the House T&I Committee unveils draft legislation to overhaul the FAA, but lawmakers on the other side of the aisle are already girding for battle.
InselAir Certified By FAA To Conduct Repair Work On US-Aircraft
01-19-2016: InselAir International B.V. has received the official 'Air Agency' certificate from the FAA (Federal Aviation Administration). This specifically means that InselAir is now an official 'USA repair station' and is allowed to perform maintenance work on US registered aircraft. The certificate was granted after an extensive audit/inspection by the FAA.
Allegiant exec resigns as safety concerns swirl
01-19-2016: Steve Harfst, the chief operating officer for Allegiant Air, resigned Friday amid questions about maintenance and other safety issues at the low-cost airline during his year-long tenure.
FAA updates flight review guidance
01-07-2016: The FAA has issued updated guidance for flight instructors conducting flight reviews and instrument proficiency checks (IPCs), and AOPA is urging instructors to look closely at the changes.
FAA moves to fine FedEx for improper repairs
01-07-2016: The Federal Aviation Administration (FAA) plans to fine FedEx for allegedly failing to properly repair an airplane part.
FAA wants safety changes in some Boeing emergency slides
01-01-2016: Federal regulators have proposed changes to Boeing 767 jets operated by U.S. airlines and cargo carriers to prevent accidental deployment of the emergency escape slides.
Most helicopters unprotected as bird strikes rise, FAA warns
12-28-2015: Government researchers warned 10 years ago that changes were needed in helicopter designs to prevent birds from crashing through windshields and disabling pilots.
Could Delta Lawsuit Have Chilling Effect On Aftermarket Cockpits?
12-23-2015: Amid a steadily growing global market for commercial avionics that saw an estimated $20 billion spent for airliners in 2015, an ongoing lawsuit over aftermarket cockpit upgrades between Delta Air Lines and avionics provider Innovative Solutions and Support (IS&S)—which will play out in 2016—is exposing the riskier side of the bull market for smaller avionics providers eyeing lucrative cockpit refurbishment contracts with airlines.
FAA Fines Boeing $12M for Fuel Tank, Other Violations
12-22-2015: Boeing has agreed to pay $12 million for failing to meet a deadline to submit service instructions that would enable airlines to reduce the risk of fuel tank explosions on hundreds of planes, among other violations, the Federal Aviation Administration said Tuesday.
Southwest to Pay $2.8 Million to Settle FAA Lawsuit
12-21-2015: Southwest Airlines agreed to pay $2.8 million to settle a lawsuit by the federal government over fuselage repairs that a contractor performed on dozens of planes.
NTSB urges renewed emphasis on standard procedures
12-04-2015: The US National Transportation Safety Board has released a video emphasising the need for stricter adherence by pilots to standard operating procedures.
FAA to Propose Safety Fixes for Certain Boeing and Embraer Jets
11-29-2015: U.S. aviation regulators on Monday will propose mandatory inspections and, if necessary, replacement of suspect parts on nearly 1,600 jetliners to prevent potentially catastrophic failures.
FAA to drone owners: Get ready to register to fly
11-23-2015: While an actual rule could be months away, drones weighing about 9 ounces or more will apparently need to be registered with the Federal Aviation Administration going forward.

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Notice: AAIRRG is a licensed insurance company in the state of Montana. AAIRRG operates in 46 states under the authority of a Federal Law which requires registration with each state in which it wishes to operate. You can ascertain your state's status by visiting www.aairrg.com/states. If you should find that your state is not included, AAIRRG will register upon your request to become an insured. This offer is void in any state or jurisdiction in which it would violate their rules or regulations.