Managing Aviation Insurance Premiums and Safety Audits
In the complex world of aviation, safety and financial stability go hand in hand. The intricacies of managing aviation insurance premiums, ensuring compliance with international standards, and navigating safety audits are crucial to an operator’s success.
To shed light on these pivotal areas, we collaborated with Osama Al Tajer, UIB’s Aviation Production and Risk Management Executive, and Matthew Prior, Senior Business Development Manager at Wake QA. Their expert insights reveal the strategies operators can adopt to manage costs, enhance safety, and effectively leverage their partnerships with insurance brokers and safety auditors. This article delves into the key factors influencing aviation insurance premiums, the impact of SARPcheck registration, and how operators can maximise the benefits of safety audits.
What are the key factors that influence aviation insurance premiums, and how can operators effectively manage these costs?
Osama Al Tajer: Aviation insurance is procured through a competitive market of competing underwriters. The main elements that underscore the cost of insurance premiums are the sums and limits insured, current market state, and past loss history of a particular risk and/or operator. Based on this, the lever which is within control of the operator is the loss history.
Underwriters are attracted to participate on risks which can demonstrate the best opportunities of profitability. History of losses, or lack thereof, is a good measurement for the future. When this is coupled with an operator that can demonstrate that an excellent loss record is built on systems and processes, with a focus on safe operations, this increases the appetite amongst underwriters.
How does a SARPcheck registration impact the safety and reliability of an airline’s operations?
Matthew Prior: SARPcheck focuses on the verification of compliance against all applicable ICAO Standards and Recommended Practices (SARPs). No interpretation or additional considerations to those standards are added by the SARPcheck Programme. This simplifies the audit process and reduces the complexity, whilst also allowing enough time during the audit for the auditors to dive deeper into each standard, making for an extremely thorough review. These standards are recognised globally as the golden rules of aviation safety and are what all commercial agreements between airlines are built upon to ensure safer operations.
The reduced complexity also means that it is more accessible, especially to airlines that have not yet been able to engage with high quality, global safety audit programmes – Phase One registration through SARPcheck can be achieved in a few weeks.
Phase Two concerns closure of any non-compliances and verification by the audit provider. There is no time limit on this closure period which removes time pressures for the audit provider to ensure permanent corrective action is applied.
From a commercial standpoint, it is worth noting that not all safety audits provide a direct route into ACMI, charter and codeshare work – SARPcheck does.
What common challenges do aviation operators face during safety audits, and what can aviation operators do to obtain the maximum benefit from the safety audits?
Matthew Prior: Operators have found that regional interpretations of ICAO SARPs within each individual authority can lead to confusion and subjectivity – by auditing directly to the ICAO SARPs, this ambiguity is removed.
Another challenge is for those Operators that have not previously had experience with such audits, this makes it difficult to know how to thoroughly prepare.
Training courses are provided to internal personnel (including the executive levels) which will equip the airline with the tools to be in the best possible shape going into an audit, and to effectively demonstrate compliance – it is key to remember that auditors are there to look for compliance rather than for gaps.
Finally, embracing findings as an opportunity to improve and increase safety levels, and not viewing the audit result as a scoresheet. Wake (QA)’s auditors have seen countless examples of varying levels of maturity and solutions to safety issues across the globe and are best placed to help an airline identify what they are doing well and what could be improved.
How can collaboration with their insurance brokers facilitate the safety audit?
Matthew Prior: The value of a SARPcheck audit is recognised by some underwriters as a way to demonstrate an airline’s commitment to safety and giving a fuller picture of the risk that underwriters are accepting. For the benefits to be realised within an operator’s insurance programme, it follows that it’s insurance broker should be aware and is aligned to the program.
Safety audit programmes utilised by the main airlines have been financially out of reach for the smaller operators, who have been reliant on other safety audits. SARPcheck introduces a new safety audit programme that is much closer to the scope of programmes that main airlines utilise whilst remaining financially viable for smaller operators.
Bursaries are available to offset a significant portion of the cost for the audit – so working with a broker such as UIB, who is affiliated with SARPcheck, will improve safety at a lower cost to the operator.
How does Wake (QA)’s global experience with over 400 airlines inform its approach to enhancing operational safety across diverse aviation environments?
Matthew Prior: In addition to our partnering audit organisations, Wake (QA)’s 20+ years of experience has helped to shape the SARPcheck program. Our multi-disciplined auditors are all extremely experienced, multi-lingual, and have experience with operations in all geographical regions, with airlines of all shapes and sizes.
Wake (QA)’s knowledge and familiarity through its tenure is applied across a wider service range, offering advanced auditor and airline safety training, as well as consultancy and other audits.
What emerging trends in aviation safety should operators be aware of, and how can proactive engagement with safety auditors and insurance brokers mitigate associated risks?
Matthew Prior: Some of the current discussion hot points include the broad subject areas of runway incursions, stabilised approaches and data link recorders. Whilst the overall safety of the aviation industry has been improving in terms of accidents resulting in loss of aircraft and/or life, many incidents which cause moderate damage to an aircraft continues to exist. Such incidents have an inflated financial impact on profitability of smaller operators who do not have large fleets where an aircraft out of service can be substituted.
Maintaining compliance with new rules and standards is a continuing concern for all our clients. Reaching out to your broker to access bursaries to fund engagements with companies like ours will assist with these issues and contribute to a safer industry.
Osama Al Tajer: The overall safety of the aviation industry has been continuously improving in terms of accidents resulting in loss of aircraft and/or life, this has resulted in frequent prolonged periods of premium reductions in the aviation insurance market. Spikes in premium levels are witnessed following specific loss events which have a wide impact across the market. Otherwise, most losses have a narrow premium hike impact.
In conclusion, managing aviation insurance premiums and navigating safety audits are pivotal components in the quest for operational excellence in the aviation industry. By adopting a proactive approach to safety, leveraging SARPcheck registration, and fostering strong collaborations with insurance brokers and auditors, operators can significantly enhance both their financial stability and safety performance.
The insights from industry experts like Osama Al Tajer and Matthew Prior underscore the importance of a solid safety record, thorough audit preparation, and continuous improvement in safety standards. As emerging trends reshape the industry, staying ahead through proactive engagement will not only mitigate risks but also ensure sustainable growth and resilience in a competitive market.
If you have any further questions or need more information, please feel free to reach out to us at aviation@uib.co.uk. Our experts are here to help you navigate the complexities of aviation operations and ensure a safer and more cost-effective future.
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