Going global

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TOULOUSE AIRPORT: An A340 crashes into barriers during engine tests on 16th November 2007, injuring 10 people. ( Pascal Pavani/AFP/Getty Images)

We all know that the aviation industry is growing in the Middle East, so when it comes to insurance it is important to look beyond the region and plan on a global scale.

Since the terrorist events of September 11th 2001, the aviation insurance industry has changed. As a result of the significant loss of life, premiums rose significantly across the entire market, whether it was airline, aerospace or any other sector.

Airport insurance in terms of the type of cover that is bought however has remained relatively unchanged and the emphasis is shifting to the issue of limits.

According to insurance broker, Willis Aerospace, the industry is currently experiencing an increase in limits and exposures in terms of passengers and movements. Post September 11th 2001, there was a contraction of cover and the coverage limits available to airports were significantly reduced.

At this time big airport developments were beginning in the Middle East and huge passenger capacity projections were announced. Today insurance coverage continues to increase as demand from airports continues to grow.

There are bigger and more expensive aircraft landing and more people passing through the region. It is for these reasons that Willis Aerospace sees the Middle East as a catalyst for shaking up the industry.

Divisional director Steve Lodge explains: "The capacity growth in the airports that are being built way outstrips any normal growth in GDP projections in terms of passenger throughput because you have a hub and spoke strategy.

Each emirate has the ability to develop its own flag carriers and airports to support global growth. You can fly anywhere in the world as long as you can fly through the Middle East somewhere, so you have a passenger throughput that is, so far, dramatically increasing.

The other advantage the region has in terms of conditions is space. The whole scale of what can be achieved is unlimited, bringing with it greater provisions from airport operators and authorities. But undoubtedly, with more services and transport on offer, more insurance coverage is required so the cost of insurance for each airport development will rise.

"More is being provided by the airport authority with a specific desire to attract more people," Lodge continues. "The more services and transport on offer the greater the risk. As the risk grows more coverage is required. It's one of the big drivers in the Middle East, certainly where we have seen an increase in passenger numbers.

It is not just the risk profile that is changing, but the complexity of it. Insurance will cover staff, airlines, property damage, car parks, terminals, retail outlets, bars, hotels, places of worship and medical facilities, as well as all ground ops equipment and vehicles.

However, as Stephen Doyle, executive director of Willis Aerospace explains, Middle Eastern airport developments are moving beyond the base case.

"The passenger experience of relaxation and shopping compared to the reality under the surface of facilitating the movement of baggage and aircraft is complicated.

At the same time keeping the region's airports as a gateway into the culture of the country signifies the scale of what the operators are trying to do. This is becoming consistent across the world. Airports are recognising they have to uphold a national prestige.

As risk profiles become more complex the identification of risk is the key issue.

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