Many factors can affect the price that an airport operator pays for insurance. Of those some are internal, such as the operational risk management the airport has developed and its claims history, and others are completely outside its control, e.g. market capacity, global losses, etc. All of them can have a major impact on the cost of insurance.
In the last 10 years the aviation community has been focussed on Safety Management Systems (SMS) as the primary means of assuring aviation safety. SMS is all about understanding the risk exposure of an operation and facilitating risk-based decision-making throughout the organisation in charge of developing it. Technology and system improvements continue to make significant contributions to aviation safety in terms of aircraft and airport design that support passenger and aircraft movements, and these are relevant factors to the whole process of transferring risks via an insurance policy and keeping its costs within reasonable boundaries given the insured profile and financial capacity. In other words, an effective operator SMS combined with initiatives in safety technology and systems is at the forefront of ensuring safe operations and management of risk, and these are all key components of the information a professional buyer will submit for consideration of underwriters at renewal time. The better the information and risk profile of the client, the better the insurance conditions will be in terms of technical coverages and associated premium costs.
It is clear therefore that underwriters and their clients share risk and thus any and all relevant measures to manage and reduce it to an acceptable level will positively influence their policy conditions. To foster a more robust safety performance the insurance market has introduced a grant or amount of money which is set aside from the premium the operator pays, and that, subject to insurers’ approval, can be invested in relevant safety initiatives. The amount depends on the size of the risk and rather than being earmarked to purchasing equipment or other hardware, is supposed to be used in softer initiatives along the lines of risk management, training and bespoke safety consulting.
The use of these bursary funds is a way for the insurer to support the insured´s continuous risk improvement initiatives and demonstrate that it is committed to safety/risk enhancement. In general terms the process to get the market on board to provide these funds entails the discussions of the risk management needs of the insured with their broker, their agreeing to a specific safety initiative and then obtaining the leading insurance approval to disburse those funds. As a stakeholder, it is clear that the market will expect to see the result of the work that was funded by the safety bursary, for instance the gap analysis report on current SMS capabilities against the baseline, the training and curricula used and participant’s feedback, the recommendations made to improve specific risks and so on. Let us look at a particular real life example.
Example: Opain S.A.
Colombian firm Opain S.A. is responsible for the management, modernization, expansion, operation and maintenance of the International Airport El Dorado Luis Carlos Galán Sarmiento, located 15km from Bogotá's centre. Opain is committed to properly fulfil the concession contract, provide quality of services, the principles of social responsibility, the protection of the environment, and the well-being, safety and health of its users and employees.
El Dorado International (Bogota) Airport consistently wins awards for excellence and in the 2021 World Airport Awards was voted second in the top 10 of the Best Airports in South America. As the concessionaire, Opain is committed to operational excellence and is continuously enhancing safety and risk management. To this end, and with the support from Gallagher as their broker and the leading underwriter, they have consistently invested their safety/risk bursary as earmarked in the aviation liability insurance policy.
In this particular scenario and following the diagram below, Opain determines their safety/risk needs based upon their performance against goals/objectives. Once the need has been identified, our team will discuss with them the best product to meet their objectives in aviation safety and risk management.
Thereafter the team creates the appropriate solution for Opain, which we then submit to the leading underwriter so he can approve the investment of the bursary for such solution.
Working on a mutually agreed time frame and delivery method, our team and the airport will complete the project. Once completed, it is imperative Opain will provide feedback to ensure that the project has been delivered/completed in a manner that has met its objectives and exceeded the airport expectations. A project summary will then be created and sent to Gallagher for further discussion with the insurance market. When agreed, this will be presented as an integral part of the renewal process of the client.
Over the past several years, the team has developed and delivered for Opain training and consulting services on the following topics:
- Airport Emergency Plan Development Workshop
- Basic Accident/ Incident Investigation Training
- Operational Risk Management Training
- Operational Risk Management Workshop
- Business Continuity Planning Workshop
- Management of Change Workshop
In conclusion, the insurance market and the broker can work to foster a better and more robust client risk and safety management. Doing so will improve their risk profile and will effectively contribute to the sourcing of the best cover available. The safety risk bursary should be used effectively towards this end.
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