Drone Industry Development Backed by Plentiful Insurance Capacity: Marsh Report

June 2, 2015

The rapid development of the unmanned aerial systems (UAS/drone) industry is underpinned by the insurance market’s willingness to provide cover for the deployment of the fledging technology, said a report published by Marsh.

Insurance capacity for UAS operations is plentiful as insurers seek to “to secure an early foothold in the sector,” said the report entitled “Dawning of the Drones: The Evolving Risk of Unmanned Aerial Systems.”

UAS usage has potentially vast economic benefits – estimated at US$82 billion and 100,000 jobs in the U.S. by 2025, said Marsh, quoting statistics from the Association for Unmanned Vehicle Systems International.

In 10 years, it is estimated that 10 percent of the global civil aviation fleet will be unmanned, the report said, noting that in 2015 alone, more than 1 million UASs are expected to be operated commercially.

John Hanslip, senior vice president, Marsh’s Aviation and Aerospace Practice, said: “Insurers are using their extensive experience of manned aircraft to assess the risks associated with drones and are providing insurance coverage based on size, uses, and values of the aircraft. Traditional policies for manned aircraft are being brought up to date and many only need tweaks to be usable for drone technology and deployment.”

Regulation remains the biggest barrier to the widespread adoption of UAS usage, the report said, noting that the regulation of UASs differs – sometimes remarkably – from country to country. “For UAS operations to fully realize their commercial potential, national and international aviation laws may need to be overhauled and/or a set of international regulations developed that consider drone use in a truly consistent manner,” Marsh contended.

The International Civil Aviation Authority (ICAO) is currently working on guidance for UAS operations, but the process is expected to take some time, the report confirmed.

In the U.S., the Federal Aviation Authority (FAA) currently authorizes the use of UASs for commercial or business purposes on a case-by-case basis, Marsh said, noting that businesses cannot fly UASs without the express permission from the FAA. However, the FAA has proposed a framework of regulations that would allow routine use of certain small UASs to be integrated into public airspace by the end of 2015.

In the UK, a House of Lords committee has recommended that a register of UASs be created, which will initially target commercial operations, Marsh’s report said. Other recommendations include the use of geo-fencing (allowing/not allowing) flight based upon GPS coordinates, clearer guidance for law enforcement, and guidance on what levels of insurance users should purchase.

“While clear and harmonized regulation is being developed, insurers are in the meantime filling this gap by providing their own safety guidance for clients, based on their experience of manned aircraft. In the US alone, several insurers are already writing policies on thousands of drones across the country,” Hanslip noted.

“Internationally consistent regulation is required to enable start-ups to plan with certainty, public perception to improve, and – where the regulation is not unsuitably onerous – entrepreneurs to expand their businesses without feeling held back by ‘red-tape’. This, in turn, will fuel the widespread adoption of this type of aircraft.”

Source: Marsh

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