The critical issue for the unmanned aircraft insurance market is to find a sustainable level of premium that is both justifiable to buyers and also sufficient to attract and retain the high quality insurers necessary to cover increasing risk exposures and a growing market over time. The unmanned aerial system (UAS) insurance industry has no useful actuarial data to draw from. There is no loss history, there are no pilot standards, no airworthiness standards and most U.S. commercial drone operators conduct business under what the FAA considers to be blatant violations of the law bordering on piracy.  Innovation isn’t the insurance industry’s strong suit and for anyone who has ever visited a large insurance company, it’s not a stretch to imagine a copy of the original Hindenburg policy being used as a guide for insuring this new technology. That said, we have to start someplace and there are a few factors affecting the price that a UAS operator pays for insurance. Unfortunately, with the possible exception of its own loss experience, an operator probably has little chance of influencing many, or possibly, any of the most significant of these. Nevertheless, aviation and UAS underwriting probably owes more to art than science and the final rate charged depends upon the underwriter’s judgment in respect to a number of ‘hard and soft’ factors. Completing a detailed application with complete documentation will help underwriters make the judgment calls and is the key to overcoming most of the ‘soft factors’. Hard factors that can impact insurance rates include: Money and Insurance market factors

  • The availability of capital (capacity)
  • Interest rates and available rates of return on investments
  • The availability and price of re-insurance
  • Competition within the insurance market
Factors applicable to the class as a whole
  • The claims experience for the class as a whole
  • The size of the risk exposure (e.g. fleet value and number of UAS operated)
  • Type of UAS operated, their, use, value and complexity
  • Country/region of the world where the risk is domiciled
Factors specific to the risk itself
  • Specific claims experience,
  • Specific operations including websites and online video
  • Technical factors’ such as crew training, maintenance, equipment, safety, culture and financial health
Whatever rate an underwriter has calculated for a risk there is one other very important matter to consider. Will any other underwriter offer a lower rate, and if so is the business of such a quality that we do not wish to lose it? Many underwriters will lower their rate if they believe that, despite what their limited statistics tell them, the risk in question is much better than other similar ones. Often their intuition may be correct but in many other instances they can go very wrong.