RISK EXPOSURE GAINS ALTITUDE AT AIRPORTSPosted On: Jul. 5, 1998 12:00 AM CST
LONDON -- The growing privatization and expansion of airport facilities worldwide is creating many new risk exposures and, consequently, new worries for risk managers.
Willem K. Lengton, corporate risk and insurance manager for Amsterdam Airport Schiphol, which owns and operates the Amsterdam Airport, told delegates at the first Global Aviation Insurance Conference in London last month that the old model of state-owned, uninsured airports is rapidly being replaced.
The international trend toward privatization of airports as the number of air travelers increases is fueling major expansion and development of airport facilities, he said.
Airports now are providing services such as retail stores, restaurants and business facilities.
Mr. Lengton said privatization brings new risk exposures as airport operators move from bureaucratic to commercial management structures.
He said new liabilities for privatized airport operators, such as directors and officers liability, errors and omissions liability, and political and currency risks represent additional exposures that risk managers must address.
Amsterdam Airport Schiphol is aiming to be a leading player in the international privatization of airport facilities. It already has a 40% shareholding in New York's JFK International Air Terminal, where Mr. Lengton is director of risk management even though he is based in Amsterdam. It also has minor shareholdings in international air terminals in Brisbane, Australia, and in Vienna, Austria.
Executives at Amsterdam Airport Schiphol also are doing a lot of master planning and privatization consulting work at airports throughout the world. They are now working on 50 consulting projects in 27 countries.
As a result, the growth of such consulting work further highlights the need for E&O and D&O policies for airport operators, Mr. Lengton said.
He said airports throughout the world are expanding their capacity as well as broadening their traditional role.
"Airports are changing, and so, too, are their exposures," he said. "Airports were once a big box. You had cars, taxis and buses on one side and aircraft on the other, and you simply went through that box. The box is still there, but it is now a big money-making machine."
He said the biggest change has been in the growth of large shopping malls within airports.
"There is a large (shopping) public, so you can make a successful enterprise," he said. "There are tourists who have time and money, and businessmen who have money."
Mr. Lengton said modern airports now typically contain shopping areas, bars, restaurants, hotels, art galleries, railway stations, and business meeting rooms and facilities. Amsterdam Airport Schiphol even has its own casino.
He said airports' traditional exposures, such as fire, rescue, damage from birds striking planes, runway layout and maintenance, refueling, and security, are still prevalent.
But the changing face of airports is creating a greater concentration of assets and people in one location. "As airports become bigger and bigger, the risks will multiply," Mr. Lengton said.
He said the expansion of airports increases the need for improved general safety as the risk of property and personal injury liabilities increases. In addition, the expansion of services brings potentially larger business interruption exposures.