The Insurance of Aviation Risks by the Conventional Insurance Markets

Abstract

This chapter provides an overview of the concept of insurance as applied to all forms of human endeavor, especially air transportation. It discusses the concepts of direct insurance, reinsurance and retrocession, and the various legal principles that, to date, have shaped the evolution of the insurance industry in general, and the aviation insurance market in particular. It also defines and sets out the scope of aviation insurance and the types of risks typically covered under this branch of insurance. Further, this chapter explains the inner workings of the insurance industry, particularly how risks are placed with, and rated by, insurers; how insurance companies (i.e., direct underwriters, reinsurers and retrocessionaires) assess risk and liability exposure, and set premiums; and, the role of the various actors in the market (e.g. brokers, direct insurers, reinsurers and retrocessionaires). The object of this chapter is not to provide a detailed treatise on insurance and aviation insurance, for such an exercise would be beyond the scope of this thesis. Rather, the overview contained in this chapter is intended to provide an insight into the complexities of the law governing insurance in general and aviation insurance in particular in order to place the subject matter of this thesis—aviation war risk insurance—in its proper context.