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Lloyd's anticipates challenges of drone coverage

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Risks developing from the growing drone industry are the focus of a report released Thursday by Lloyd's of London.

The drone market is expected to double to $91 billion in the next 10 years, according to Lloyd's report, “Drones take flight.” Drone technology is novel as well as controversial, and insurance is expected to be a key component of the risk management framework that is needed for drones to operate safely and respectfully, the report said.

Drone insurance can cover third-party liability, physical loss and damage to the system components during operation or transit. These policies can be tailored to suit individual exposures and may also include directors' and officers' liability, professional indemnity, employers' liability, product liability, cargo liability, terrorism, war and hijacking.

The Lloyd's report listed five, fundamental risks for insurers to consider:

• Invasion of privacy: Perhaps the greatest concern from drone use, professional indemnity insurance can cover damages for breach of privacy from drones.

• Negligent or reckless pilots: Insurers need to be concerned about moral hazard because pilots could feel disassociated from risks. Lead insurers should consider higher-risk retention requirements such as training and accreditation, and also that pilots prove to act responsibly.

• Patchy regulations: a solid regulatory framework is critical to drone insurance providers. Currently, regulation is inconsistent between nations.

• Cyber attack exposure: Cyber security measures should be a significant consideration for underwriters' risk assessment for commercial drone use.

• Effective airspace control and collision-avoidance technology: These advances will become key requirements for drone operations in busy airspace, according to the report.