UNIT - 7

AVIATION
INSURANCE
 "Aviation in itself is not inherently
dangerous. But to an even greater
degree than the sea, it is terribly
unforgiving of any carelessness,
incapacity or neglect."[3] — Captain A. G.
Lamplugh, chief underwriter and
principal surveyor of British Aviation
Insurance Company (1931)
Background of Aviation
Insurance
 The beginning of Aviation saw the Wright
Brothers in 1903,
 Flying the very first rigid-framed plane in North
Carolina, USA
 Aviation Insurance was first introduced in the
early years of the 20th century.
 The first-ever aviation insurance policy was
written by Lloyd's of London in 1911.
 The company stopped writing aviation policies in
1912 after bad weather at an air meet caused
crashes, and ultimately losses, on those first
policies
 Aviation insurance provides coverage for hull
losses as well as liability for passenger injuries,
environmental and third-party damage caused
by aircraft accidents.
 Aviation insurance is insurance coverage
geared specifically to the opearation of aircraft
and the risks involved in aviation.
 Aviation insurance policies are distinctly
different from those for other areas of
transportation and tend to incorporate aviation
terminology, as well as terminology, limits and
clauses specific to aviation insurance.
 Occasionaly a commercial jet will crash
accidentally due to mechanical or human
error, killing hundreds of passengers and
causing extensive property damage to
surrounding buildings
 The policy provides physical damage
coverage for damage to the aircraft and
liability coverage for the property damage
and bodily injury arising out of the
ownership or use of the insured aircraft
Physical Damage Coverages
 A plane on the ground can be damaged by
wind, fire, collapse, theft, vandalism, or
other perils
 A plane on flight can collide with another
plane, can be struck by lightning, damage
by winds, can experience mechanical
difficulties from a fire or explosion
 Physical damage insurance provides
coverage for direct damage to the aircraft
Liability Coverages
 Three liability coverages are available
 Bodily injury liability
 Passenger bodily injury liability
 Property damage liability
Types of Aviation Insurance
 Public Liability Insurance
 Passenger liability insurance
 Combined Single Limit (CSL)
 Ground risk hull insurance not in motion
 Ground risk hull insurance in motion
(taxiing)
 In-flight insurance
Public Liability Insurance
 This coverage, often referred to as third party
liability covers aircraft owners for damage that
their aircraft does to third party property, such as
 Houses
 Cars
 Crops
 Airport facilities
 Other aircraft struck in a collision.
 It does not provide coverage for damage to the
insured aircraft itself or coverage for passengers
injured on the insured aircraft.
 Public liability insurance is mandatory in most
countries
Passenger liability
insurance
 Passenger liability protects passengers riding
in the accident aircraft who are injured or
killed.

 In many countries this coverage is

mandatory only for commercial or large
aircraft.

 Coverage is often sold on a "per-seat" basis,

with a specified limit for each passenger seat
Combined Single Limit
(CSL)
 CSL coverage combines public liability and
passenger liability coverage into a single
coverage with a single overall limit per
accident.

 This type of coverage provides more

flexibility in paying claims for liability,
especially if passengers are injured, but
little damage is done to third party
property on the ground
Ground risk hull insurance not
in motion
 This provides coverage for the insured aircraft against
damage when it is on the ground and not in motion.
 This would provide protection for the aircraft for such
events as
 Fire
 Theft
 Vandalism
 Flood
 Mudslides
 Animal damage
 Wind or hailstorms
 Hangar collapse
 Uninsured vehicles or aircraft striking the aircraft.
 The amount of coverage may be a blue
book value or an agreed value that was
set when the policy was purchased.
 Most hull insurance includes a deductible
to discourage small or nuisance claims.
 Ground risk hull insurance
in motion (taxiing)
 This coverage is similar to ground risk hull
insurance not in motion, but provides coverage
while the aircraft is taxiing, but not while taking
off or landing.
 Normally, coverage ceases at the start of the
take-off roll and is in force only once the aircraft
has completed its subsequent landing.
 Due to disputes between aircraft owners and
insurance companies about whether the
accident aircraft was taxiing or attempting to
take-off, this type of coverage has been
discontinued by many insurance companies
In-flight insurance
 In-flight coverage protects an insured
aircraft against damage during all
phases of flight and ground operation,
including while parked or stored.

 Naturally, it is more expensive than not-

in-motion coverage, since most aircraft
are damaged while in motion.
Aviation Cover Note
 A temporary document issued by an insurance
company that provides insurance coverage
until a final insurance policy can be issued.
 A cover note is different than a certificate of
insurance or an insurance policy document.
 Insurance cover note is a document used to
provide evidence of insurance if policy
documents are not immediately available
 It issue as a temporary cover during
negotiation period pending finalization of the
matter.
 Nepali skies have claimed the lives of
more than 738 people in 55 air accidents
over the past seven decades, according to
records maintained by the Aviation Safety
Network (ASN), a US-based international
organisation.
 ASN figures show that the death toll from
plane crashes have increased to 172 this
past decade (2006-2016) against a toll of
103 in the previous decade.
 Accidents of two major foreign airlines
 In 1992— the Thai Airways crash that killed
113 and the PIA crash in which 167 died.
 Globally, aviation is considered the
safest mode of transport, but the high
incidence of plane accidents in Nepal
places a big question mark over the
country’s aviation safety.
 Are Nepal’s skies comparatively unsafe?
 Are we geographically cursed?
 Is human error playing a crucial role in
fatal accidents?
 Is our aviation industry technologically
incompetent?
 Increasing frequency of plane crashes in
Nepal is also directly related to lack of
application of internationally accepted
and developed safety measures.
 Nepal’s aviation sector is comparatively
weak in terms of updating itself on safety
standards and lacks technical manpower
to learn, adopt and implement
sophisticated safety measures practiced
globally
TIA FLIGHT MOVEMENT
YEAR 2016 (DOM/INT'L)
Cargo Movement (in
Aircraft Movement Passenger Movement Tons)
Domestic 36938 Domestic 880895 Domestic 3412871
Dep. Out Out

Internatio 13560 Internatio 1823598 Internatio 6798.06

nal Dep. nal Out nal Out

Domestic 36938 Domestic 876701 Domestic 538450

Arr. In In

Internatio 13558 Internatio 1687144 Internatio 13550.88

nal Arr. nal In nal In

Total 100994 Total 5268338 Total 3971669.

94
RISK
 Hull All Risk (Loss or Damage to the
Aircraft)
 Hull War
 Passenger and Cargo Legal Liability
 Crew Personal Accident
 Pilots Loss of License
 Third Party Liability
History/Background of Aviation
in Nepal
 In 1947, a lone pilot landed his glider on the
cow-razing pasture (Gauchar) cum golf
course, which later metamorphosed into the
present Tribhuwan International Airport (TIA).
 Subsequently, the year 1949 started the
formal beginning of aviation in Nepal with
the landing of a 4-seater lone powered
vintage Beach-craft Bonanza aircraft of
Indian Ambassador Sarjit Singh Mahathia at
Gauchar.
 On February 20, 1950, the first charter
flight took place between Gauchar and
Calcutta (now Kolkata) in a Himalayan
Aviation Dakota.
 The airport was inaugurated by King
Mahendra in the year 1955 and was
renamed as Tribhuwan Airport in the
memory of his late father.
 Later in the year 1964, it was renamed as
Tribhuwan International Airport.
 Department of Civil Aviation established in 1957
 The then Royal Nepal Airlines Corporation (RNAC)
started scheduled services domestically and
externally.
 The statutory regulations regarding civil aviation
were introduced under the Civil Aviation Act, 1959
(2015 BS)
 Nepal obtained the membership of International Civil
Aviation Organization (ICAO) in 1960
 Civil Aviation Authority of Nepal (CAAN) was
established as an autonomous regulatory body on 31
December 1998 under Civil Aviation Act, 1996
 The actual development of civil aviation in
Nepal started in 1992, with the Nepal
government adopting the Liberal Aviation
Policy, which lead to an emergence of
private sector in domestic air transport.
 25 airlines from different countries are
operating their services in Nepal
 3 airlines from Nepal are operating
international schedule passenger services.
International Air Transport
 Nepal 3 Qatar 1
 India 3 Oman 1
 Bhutan 2 South Korea
1
 China 4 Hongkong 1
 Thailand 1 UAE 3
 Bangladesh 3 Turkey 1
 Malaysia 3 Singapore 1
 Despite facing several constraints,
Nepal’s aviation sector, particularly the
international sector, has been growing at
a healthy rate.
 Increased movement of migrant workers
in search of job overseas, tourist inflow as
well as large number of Nepalese
students heading abroad for studies has
helped generate the robust passenger
traffic growth over a decade.
 The travel demand to Nepal is likely to continue over
the next 20 years, according to a study conducted by
European aviation giant Airbus.
 In its latest report on Nepal Air Traffic Analysis, Airbus
has said international passenger traffic in Nepal is
expected to grow at the rate of 6.4 percent annually
over 20 years (2014-34) due to increased travel
demand in the Middle East, Europe, Australia, Japan
and the US markets.
 The Airbus forecast that 50 new passenger aircraft
will be required to serve the Nepal market by 2024.
 The report said that international passenger traffic
had tripled over the last 10 years.
Role of Aviation Insurance
 Importanec of Aviation in country like
Nepal.
 Travel Destination
 Tourism
 Geographical conditions of country
 Aviation as a driving force to economy
 Import and Export
 Increasing number of Airlines and their
services (Both International and Domestics)
 Increasing number of accidents.
 Number of airports
 Number of Planes
 To Insurance companies
Home Assignment 2
 Discuss the different types of risk of motor
insurance and highlights the motor
insurance practices in Nepal. 5
 Define the contractor's all risk insurance. 5
 Briefly explain the importance of aviation
insurance. 5
 Prepare and Explain a list of risk covered by
the marine insurance. 5
 Submission Date April 21, 2017