Meet our experts: Nico Herder // Aviation Products Liability Insurance

Mr Herder, please give us an overview of the risks Delvag covers in the area of aviation products liability insurance.
First and foremost, we insure the classic product liability risk as so-called sectoral cover. This means that if a manufacturer of aircraft or its parts brings a defective product or partial product onto the market despite extensive quality assurance, we cover the financial risk from possible damages, since the aviation risk is usually excluded in general liability policies. Services performed in this area, such as maintenance or cleaning, are also covered. In essence, this means that we do not insure aircraft or pilots in this segment, but companies from the aviation industry.

That sounds pretty hands-on in terms of the products insured. Can you give a few examples?
The spectrum of insured products and thus also companies is quite extensive. This starts with the control units in the faucet of aircraft toilets and goes on to the manufacturer of arm rests or dining tables, who supplies the seat manufacturers, all the way to panelling elements or the interior fittings of the cabin.  We also count manufacturers of paragliders and thus the safeguarding of manufactured lines or harnesses among our clientele, as well as workshops for maintenance of aircraft of all kinds. From my point of view, the diversity of this sector is what makes it so exciting and sometimes, even after many years in the business, you are still surprised by the details of what is produced and where our coverage is used.

Really interesting. Who is our offer in this area specifically aimed at?
As already mentioned, we insure companies in the aviation industry in this area. Since we ourselves are a smaller and specialised insurer, our offer is primarily aimed at the classic SME sector, i.e. small and medium-sized enterprises. In doing so, then throughout the entire value chain.  This means from the development company to production and sales as well as maintenance or repair companies, the so-called MROs, i.e. Maintenance Repair Overhaul.

For some time now, SMEs have had the problem that large insurers often no longer cover these types of smaller risks or charge high minimum premiums. This is where Delvag comes in, as we can continue to offer attractive conditions for our customers in this area.

What are your responsibilities as an underwriter in this segment?
In my position as an underwriter, I have a lot of contact with brokers, as we offer insurance solutions in the aviation product liability area exclusively through brokers. A lot of consulting know-how and experience is required here in order to be able to subsequently prepare offers that meet the needs of our customers. Above all, it is important that the coverage fits the liability and risk situation. We support our brokers in all matters so that they can advise their and thus also our clients in the best possible way regarding the corresponding insurance options. Tailor-made solutions such as the consideration of extended warranty periods or indemnity and recourse agreements are a matter of course for us. From our point of view, the most important thing is that it fits in the end and that there are no gaps in coverage in the event of a claim.

Two pandemic years are behind us. How is the aviation industry doing?
Basically, everyone suffered because the airlines initially stopped investments and partially cancelled or postponed orders with the aircraft manufacturers. Large companies such as Airbus bridged the time with appropriate reserves, smaller or medium-sized companies had to struggle much more in our experience. However, the large companies continued to try to maintain supply chains as best they could during the crisis and, for example, held on to corresponding supply contracts with suppliers. This has certainly helped. The production of smaller aircraft for general aviation was also not so badly affected by the crisis and supported the suppliers. At a certain point, with the lifting of the restrictive travel restrictions, there was also a slight recovery among the airlines with effects on investments. In the context of sustainability, for example, there is a tendency that many airlines are already preparing for the time after the crisis and want to position themselves for the future. This means continuing fleet renewal with more fuel-efficient aircraft with modern engines to further reduce CO2 emissions. The aviation industry also benefits from this development.

Another interesting aspect was that the Chinese market was almost fully active during the entire pandemic, apart from the strict regional lockdown measures. Within the country, airline operations were maintained and, due to their size, created corresponding demand throughout the aviation industry. Small and medium-sized suppliers in this country also benefited from this. Accordingly, the pandemic was also a shock for the industry at the beginning, but upswing tendencies were noticeable much faster than was the case with the airlines.

Talking about innovation. Which topics were present in the past years or are present at the moment? Have new risks been added from the insurers' point of view?
A major topic in recent years has been 3D printing and additive manufacturing. From the insurer's point of view, the question has arisen as to how the liability situation is to be assessed in the event of a claim and what effects the manufacturing technology has on the business model of our customers. In the end, the manufacturing processes complemented each other well, so that 3D printing exists alongside the regular production processes and can show its full strengths in prototype construction, for example. But even smaller engine parts are now being mass-produced using the additive manufacturing process.

Currently, IT companies or software manufacturers working in the aviation industry are another big topic. After all, aircraft are highly technological machines, so to say flying computers. The requirements and use of software and the degree of digitalisation are also constantly increasing in aviation. In terms of coverage, this is an issue for us in the product liability area, as software could also be seen as a supplied product. For product liability insurers, this can lead to difficult liability issues in the event of a claim, such as the question of whether software falls within the scope of the Product Liability Act (ProdHaftG). This is a challenge for the legislator and a revision of the European Product Liability Directive is currently taking place to adapt the liability rules to the digital age as well as to developments in the field of artificial intelligence at the European level.

Thank you very much for the interview.

About Nico Herder
Nico Herder has been active in aviation risk underwriting at Delvag for 10 years; his focus is on product liability insurance. Before that, he worked for the Delvag Group for about 5 years in various positions, including project management. In his free time, he enjoys riding motorbikes and likes to spend the rest of the time with his family.
 

From Philipp Schmid
Corporate Communications Delvag
kommunikation@delvag.de