Aviation Insurance

Aviation insurance covers the hull and liability hazards of both commercial airlines and private aircraft; it does not include accidental injury or death coverage, which companies issue separately. During the 1960s and 1970s, many new companies entered this field, primarily as reinsurers. These companies compete among themselves and with foreign insurance carriers (mainly Lloyd's of London) for both U.S. and foreign aviation business.

One problem associated with aviation insurance is the constant exposure to catastrophic loss. As speed, size of equipment, fuel load, and passenger capacity continue to increase, the catastrophe hazard grows in direct proportion. There are too few commercial aircraft at risk to allow successful operation of the "law of large numbers," upon which underwriters rely to predict losses. Therefore, aviation underwriters must rely on their own judgments in determining rates.