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Drone coverage has yet to take off despite huge potential

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ATLANTA — Drones are considered a major potential area of growth for the excess and surplus lines industry, but underwriters are still coming to terms with the risks involved.

“The industry is wrestling with how to address the drone exposure,” said John Edack, San Francisco-based senior executive vice president of E&S casualty for Arch Insurance Group.

“There are more commercial clients using drones as part of their operations, and drones are not covered” by traditional general liability or aviation policies, “so if you do want drone coverage you do need to get specific manuscripted coverage” in the E&S market, said David J. Bresnahan, Boston-based executive vice president of Berkshire Hathaway Specialty Insurance Co., which offers the coverage.

Hank Haldeman, executive vice president of wholesaler and underwriting manager The Sullivan Group in Los Angeles, said he is concerned about potential regulatory and legal liability.

“We’re in an environment where we do not know either what the laws will be or what the courts will say,” and that uncertainty “is why it’s an exposure that belongs in the nonadmitted market,” said Mr. Haldeman.

Observers say that while not yet introduced, another potential area of coverage is autonomous or driverless cars and other forms of transportation.

But they say also the standard market is unlikely to stand by quietly for long and risk losing this lucrative line of business.