Aviation Insurance | Introduction and Historical Background


aircraft Insurance

Aviation insurance provided by aviation insurance companies is a highly specialized sector designed to meet the needs of aircraft insurance for major airplane manufacturers, airlines, airports, general aviation, and aviation insurance for other aviation support services.

The basic aviation insurance policies came from marine insurance and other familiar general insurance forms – especially fire and automobile.

Interestingly, the basic airplane policies were derived from the earlier marine insurance language, and they referred to the aircraft as a "hull. While aircraft public liability protection, the form followed the automobile policy except for separate passenger liability coverage within the aircraft liability policy.


Unlike automobile insurance, it's hard to cover all aspects of aviation insurance with single insurance for this reason many aviation insurance companies provide the best aircraft insurance and different aviation insurance for other aviation support services.

Because of many insurance conditions, insurance companies offer many different possibilities to find individual solutions for both general aviation and commercial aviation.

For example, for commercial aviation, aircraft insurance provided by aviation insurance companies depends on whether the aircraft is:

  • flying
  • on the ground
  • in the hunger
  •  flying for training, etc.

In aviation, aircraft aren't the only object of value when it comes to aviation insurance. There are special aviation insurance services for hangers, airports, ground support equipment, maintenance facilities, avionics, and many more.


In this article, you will gain an aviation insurance introduction and historical background about it.


What do we mean by insurance?

Insurance is primarily designed to protect the insured(s) against loss or damage caused by unforeseen or unexpected future events (i.e., events which cannot be predicted or otherwise guarded against).


Since insurers intend to cover events of a contingent nature, they will not insure against future events which are certain to occur. Neither will insurance cover loss or damage deliberately caused by the insured.


Aviation insurance, how does it work?

Aviation insurers provide insurance cover for insureds such as airlines, aircraft owners, airports, and aircraft service providers against loss, damage, and liability, in return for premiums.

Insurers in turn pay premiums to reinsurers to offset part of the risk. The risk that an insurer can prudently cover is determined by the sum of funds from his capital providers; retained profits, and any reinsurance he has purchased.


Let us understand more about this:

You may hear about aircraft liability and hull insurance. So, aircraft accidents can cause damage to or destroy aircraft and other property such as airport facilities. Furthermore, a serious injury or even death to passengers, crew, and the general public.

Aircraft operators (airlines) who made the accident can’t rely on their commercial general liability (CGL) policy for protection. This policy contains a broad aircraft exclusion that eliminates coverage for most aircraft-related claims.

Note: A Commercial General Liability (CGL) policy protects aircraft operator from financial loss due to property damage or personal injury caused by aircraft operator's services. It does not cover liability for death sustained by third parties other than passengers or damage to property owned by third parties, etc.

Aircraft liability and hull insurance cover the physical loss of or damage to the aircraft, third-party bodily injury, and property damage claims against an aircraft owner or operator.



History of Aviation Insurance

1-  Lloyds London

Lloyds London was the first to make aviation insurance possible in 1911 when it developed the first aviation insurance policy.

One year after, there was an air meet with bad weather that caused many aircraft crashes.

Lloyds London agreed to cover legal liability on some aircraft participating in an air meet before the start. The losses on the insurance policies were so bad and led to the giving up insuring airplanes by the underwriters.


Air meet crashes made the underwriters at Lloyd London get financial losses. They considered the aircraft unsafe. Therefore, they only covered persons and property.

After many years, the growth and development of aviation made it necessary that the protection afforded by insurance become available, and a few policies were written on aircraft at that time.



2- After the first world war.

After the first world war, planes became more reliable and insurable. Travelers insurance companies (on May 1, 1919) began offering a comprehensive policy that in many respects launched U.S. aviation insurance. It provided public liability protection, life insurance, workers' compensation, and trip accident coverage.


3- Aviation Insurance In 1928-1929

Three pools of underwriters were organized to write aviation insurance. In 1929 the Warsaw convention was signed. The convention was an agreement to establish terms conditions and limitations of liability for carriage by air. It was the first step toward stability for the airline industry regarding aviation insurance.

That is why several large financial groups established holding companies for aviation investments. They began by acquiring many small airlines and then purchased manufacturers of aircraft and aircraft parts.



4- Aviation Insurance After 11 Sep 2001

11 September 2001 terrorist attacks result in an additional premium of US$1.25 per passenger carried by airlines. And surcharge of third-party liability covers within airline policies.


The terrorist attacks were an unprecedented event with losses on a scale never before contemplated by the insurance industry, far exceeding previous man-made or natural catastrophes.


This event led to a new update for aviation insurance policies and conditions, especially after the fact of the possibility of further occurrences anywhere in the world, particularly arising out of the use of aircraft to cause third-party damage.


5- Aviation Insurance After 2020

As we know, the aviation industry has directly suffered the negative impact of the outbreak of a Covid-19 pandemic, especially due to the total or partial airspace closure in several countries and the consequent cancellation of most scheduled flights.

Changes to the factual conditions of daily aviation activity Led to changes in the circumstances around the aviation insurance policies.

During that time, airlines and aviation insurance companies faced new challenges due to the changes in the uses and operations of aircraft under aviation insurance coverage.

airlines were forced to communicate to aviation insurers about the new operating conditions to ensure that such changes are not excluded from the coverage.



Aviation insurance is primarily designed to protect the insured(s) such as airlines, aircraft owners, airports, and aircraft service providers against loss, damage, and liability caused by unforeseen or unexpected future events.

For example, Aviation insurance covers the following

  1. Aircraft hull and aircraft liability
  2. Aircraft crew personal accident
  3. Aviation products liability
  4. Aviation cargo
  5. Aviation liability

"Aviation in itself is not inherently dangerous. But to an even greater degree than the sea, it is unforgiving of any carelessness, incapacity, or neglect." a famous quote from Captain A. G., in 1930.

Maged Saeed AL-Hadabi

I’m Instructor / Maged Saeed Al-Hadabi. ​ Air Cargo / IATA Dangerous Goods Regulations / Safety Management System Senior Instructor, Auditor [ Yemen Airways] . Approved IATA DGR/ SMS Instructor by Yemen Civil Aviation Authority.

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