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Judy Greenwald

Underwriters expect influx of drones once FAA regulations are finalized

May 11, 2014 - 6:00am


Underwriters are awaiting Federal Aviation Administration regulations that will cover “unmanned aerial vehicles,” more commonly known as drones.

The rules are expected to lead to increased use of the unmanned aircraft, which will boost business in the competitive, soft general aviation market.

While some insurers provide coverage for drones, observers say the market is not expected to really take off until the regulations are finalized.

In 2012, Congress told the FAA to devise a plan by Sept. 30, 2015, for the “safe integration” of what the FAA calls “unmanned aircraft systems”.

The FAA has authorized limited use of unmanned aircraft systems for “important missions in the public interest” including firefighting disaster relief, search and rescue and law enforcement. However, operations are not authorized in airspace which exists over major urban areas, and areas where there is a high density of aircraft. The FAA has said it wants to strike the right balance between fostering growth and keeping airspace users and people on the ground safe.

The agency said it is developing regulations, policies and standards on a wide variety of unmanned aircraft systems. Later this year it plans to publish a rule for such aircraft that are less than 55 pounds, which “will likely include provisions for commercial operations,” according to the FAA's website.

A drone's wingspan can be as large as a Boeing 737 and smaller than a radio-controlled model airplane, according to the FAA, which estimates there will be as many as 7,500 such aircraft in use by 2018.

“We're keeping our eyes on” this market, said Joseph Braunstein, general aviation practice leader at Marsh L.L.C. in New York “I think everyone sees a big premium potential right now.”

“The future is pretty exciting when you think about the types of missions that these types of aircraft can endure from a timing standpoint and not putting human lives at risk, including applications in energy and forestry,” said Peter Schmitz, New York-based head of Aon Risk Services' U.S. national aviation practice. There are “hundreds of different ways they'll be used.”

“That's a market whose potential is going to be fantastic once the FAA and local governments figure out how they can safely allow people to monetize” such aircraft, said Michael J. Kerwin, vice president of analytics at Frederick, Maryland-based Avemco Insurance Co., a subsidiary of HCC Insurance Holdings Inc.

There also is uncertainty about rules outside the U.S., said Olivier Marre, London-based senior vice president of aerospace and aviation at Allied World Europe, a unit of Allied World Assurance Co. Holdings A.G.

“I am not sure yet that anybody has clearly identified what regulations will be applicable to drones, at least in Europe and Asia,” Mr. Marre said.

 



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