Dive deep into the ever-evolving world of aviation insurance with Jeff Bruno! Explore challenges & solutions surrounding eVTOLs, aging pilots, and older aircraft insurance. Tune in now to be at the forefront of the aviation conversation!
0:00:00
Welcome to the Aviation Insurance Podcast. The podcast that helps aircraft owners and aviation businesses learn and understand the complex world of aviation insurance and risk management. From the basic principles of aviation insurance to risk management techniques and updates on the aviation insurance market, the Aviation Insurance Podcast is your guide to traverse the world of aviation insurance. Now, here’s your host, Tim Bonnell. Well, welcome to the Aviation Insurance Podcast. And today I’m really pleased to have a special guest, Jeff Bruno. Jeff is the President and Chief Underwriting Officer of Global Aerospace, head of our US operations here. And he has been since April of 2015. He has over 30 years of experience in insurance, reinsurance, and aviation insurance. He’s been with Global since 1988, so he’s got quite a tenure there through multiple underwriting and senior leadership roles. He graduated with honors from Fairleigh Dickinson University, who I have been informed made the Sweet 16 last year, and with a degree in economics. And he holds the Chartered Property Casualty Underwriter to the CPCU and the Certified Aviation Insurance Professional designations. Jeff is not just an insurer, he is a pilot. He is a type rated ATP airline transport pilot with over 5,000 logged PIC hours and he maintains single, multi-engine and instrument flight instructor certificates. So Jeff, welcome to the show and thank you for being here.
0:01:31
Thanks Tim, it’s a pleasure to be here.
0:01:33
Yeah, I still, I remember Jeff meeting you. I won’t go into every single detail, but we played golf together the first year I went to the Aviation Insurance Association, and we had quite the time. I’ve appreciated you ever since and I’ve always enjoyed your support of the Aviation Insurance Association and recently hosting our core principles course for that organization. The keynotes that you’ve given in recent years have been very beneficial to our industry. So I’m looking forward to our discussion today.
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How bad did I tear the golf course up that game? I think we did pretty good from what I can remember, but it’s been a couple decades plus ago, so it’s all good. But so just the first question, what are you most excited about in the aviation insurance market today? A good question. Look, I think there’s honestly a great deal to be excited about. But for sake of brevity, let me touch on two or three things if I may, and I think the first is you. There’s a great deal of youth entering the industry with a fresh perspective, and it’s extremely healthy, and I think it’s needed. I recently had the opportunity, Tim, to teach a risk management and insurance class at Embry Rental. I have to tell you, I was really energized by that. They were very eager students, most of them were grad students, and they were very excited, not about insurance per se, but about the concept of risk. And I think more importantly, what managing risk does in terms of protecting the future of flight, enabling investment in aviation, and making things better when things go horribly wrong. So that was very energizing for me. And as you point out, we had a full house here in Mars Plains for the AIA core principles course, which you were a big part of. And here at Global, by the way, we’ve hired quite a few individuals who are new to the industry and are very excited about their careers in the industry. So it’s all good there. The second thing that excites me and excites me a great deal is new technologies. The future of flight is very, very exciting, and we’re happy to be a part of it. Here at Global, we have an entire department that’s dedicated to addressing emerging tech. In my view, Tim, it all began with the experimental aircraft movement years ago, but honestly, it’s exploded since. We have things like electrification, autonomous flight, new materials, higher engine efficiencies, space tourism, and even we’re even talking about the return of passenger carrying supersonic flight. And all of that is right here in front of us. And that newer technology, some of it’s even, believe it or not, bled into underwriting with the use of portals. And even AI is now impacting our work. So I think there’s a lot to be excited about there. And I’m really thankful that I’m underwriting in that exciting period of time. And I think lastly, maybe if I could throw this one into the mix, ESG. Much of what I just described above, at least in terms of new tech, is being driven by the growing desire to decarbonize. And youth are particularly interested in that. And no matter where anyone’s opinion falls on global warming, the desire to decarbonize, it’s clearly there. And whenever society has a great challenge, it usually leads to great innovations. And I think we’re seeing that, right? So I’m really excited by the future of flight and underweight, both.
0:05:10
Yeah, there’s a lot going on. And I want to dig into a couple of those here in a minute. But first, I want to find out what are your biggest concerns in or for the aviation insurance market today, or what are the biggest challenges that we’re facing, or you as a carrier is facing?
0:05:26
Well, overall, I’d have to say the lack of discipline and underwriting, and the general inability for individuals within the market to see the bigger picture concerns. In some ways, Tim, it’s a forest for the trees issue. I think there’s a tendency in our industry to be far too transactional. Now, look, I understand that. It’s a small industry. We all compete for a finite number of risks. But by way of one example, the biggest thing that excites me, newer technologies is leading to an increased cost of claims. So if you take that concept one step further, the trend lines regarding increases in cost of claims is very clear, yet the market just seems to ignore them. Cost of new materials, complexity of repairs on newer kid aircraft, throwing supply chain issues, less experienced personnel resulting in higher severity of hold claims, and the dramatic upward shift too that we’re seeing in liability claims inflation that’s clear. All of that is in the mix and as a market Tim we always seem to be behind trends like these and we only seem to realize them when it’s too late. Then inevitably there’s a reaction and customers, our customers have a hard time understanding that. I think the market really needs to understand something. Whoever wins the revenue war isn’t the winner. The game here, us as insurers, we try to collect enough dollars from the masses to pay the unfortunate losses of the few, hopefully cover our expenses, and return something to our shareholders in the way of an underwriting property. That’s the winner, but as a market, for some reason, we seem to forget that time again.
0:07:14
Yeah, I mean, there’s a lot of empirical data about the negative financial returns basically in the aviation insurance market. You highlighted some of those in a keynote at the Aviation Insurance Association Conference a couple of years ago. And you know, so rates have gone up over the last several years to try to address this. You know, what needs to happen, and you’ve touched on this a little bit But what needs to happen for the curvy current aviation insurance market in order to for the market to stabilize while keeping rates
0:07:47
You know sustainable for insurers what needs to happen?
0:07:49
well
0:07:51
unfortunately in history shows this bruised egos and a little bit of red ink tend to bring the rakes to an adequate slant sustainable slant profitable level. But Tim, I think you use an interesting word and it’s sustainable. And that’s where we would all like to see rates, stable and sustainable without peaks and drops. But I acknowledge that this is a market after all and competition being what it is, there’s always gonna be cycles.
0:08:22
Yeah.
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Yeah, when the money gets to be good, more people went in on it, rates come down, and then here we go.
0:08:30
Yeah, here we go and we have that cycle, but I think our customers have a hard time understanding that,
0:08:36
and look, that’s unfortunate. Yeah. It’s one industry where everyone always wants their cost reduced every year, and if you think about, has your labor gone down, has your all the every other expense you have does it go down every year and or stay the same? And the answer is no. And with insurance, it’s tough to tough to understand. But hopefully customers and insurance buyers in the aviation insurance market can start to realize that it’s important for everybody to pay what’s needed to keep the market stable so that
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something worse doesn’t happen. And and Tim, listen, there’s inflation, right? And there certainly is claims inflation. Now, I’ll tell you that claims inflation, especially Hull claims inflation is outpacing general. But everybody, everybody is paying more for products and services now than they were during COVID. Yeah. So I think that follows on inevitably to your price for insurance because the cost of repair is just simply higher than honestly than it’s ever been.
0:09:44
Well, yeah, and with you’d mentioned the supply chain issues, so aircraft are sitting on the ground longer and on liability claims that really adds up significantly beyond what the actual repair is. Yeah. Well, we talked about some of the exciting things, so we return back to that and some of the technologies that are coming on and in conversations I’ve had with other industry leaders, you know, we keep talking about those technologies. So how do you foresee some of those latest technologies like flight data monitoring or telematics as a formal term, changing how aircraft insurance policies or aviation insurance policies are underwritten in the future?
0:10:22
Well, my answer might surprise you, but I think telematics is a bit overblown. While it might more precisely measure exposure in terms of things like hours flown and currency, it won’t necessarily predict accidents or fully guide your underwriting. I think where things like this come into play if you use it this way is in loss prevention. Things like FOQA or Flight Ops Quality Assurance, which essentially is a form of telematics when aggregated with larger groups of data so you have a benchmark to measure you or your pilots against, can pretty dramatically improve the safety.
0:11:06
Excuse me.
0:11:07
Sorry. Airlines have benefited from this for years, and we’re just seeing this trickle down into GA. Large data providers, for example, like GE, are aggregating data. And they’re feeding it back to customers who are taking this data to training entities, like flight safety, who can then train anomalies and trends that fall outside of the mean for flight department crews. That’s a very exciting development. And I think it’s bound to produce outstanding results for those who participate in programs like that. We’re paying very close attention to it and we do factor that into our underwriting. Yeah you’d think that you know and I for one have not been one to jump on the monitor my driving apps for discounts because but I think if you do there is some encouragement to you know operate a little safer. But yeah, again, I think that plugging into training certainly has a lot of advantages. Yeah, we talk about the FOQA and the airlines, and as NTSB Vice Chair Bruce Landsberg was saying, it’s really part of it’s economic. A lot of this technology is more expensive, and so you will see it in the airlines and then and then corporate as it makes it makes its way down. But hopefully the technology will continue to come to an affordability standpoint where it makes economical sense, even for, you know, single engine piston operators. Yeah. OK. Oh, OK. So that’s like that’s a step lower for the moment. But we are seeing this really have some high take up in industrial aid operations, charter companies too. I mean, just think about the opportunity here. If you’re a flight department and you have six, eight, twelve pilots, you can compare your pilots against one another. But when you compare what you’re doing with your, let’s pick a Citation XL, when you compare what your crews are doing with your citation Excel with all the citation Excel’s around the country and all of a sudden you begin to see a trend that your crews, their approaches are not as stabilized as others. And you take that data and you bring it to flight safety, you custom make a training program for you. That’s a big step forward. Oh yeah.
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Yeah, that’s a big deal. That’s exciting to see and I imagine that the capabilities of this technology will continue to increase and you know the good news is is there are insurers like yourselves that are trying to stay on top of it and and and be in sync with what is happening with these technologies and the opportunity to improve safety and operations. So going on to a different technology, how do you foresee the insurability of or challenges with or opportunities ensuring these eVTOL aircraft as they increase in size and use?
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You know, they’re talking about, you know and I’m happy to say we’re the market leader in insuring this particular segment. They are insurable, so let’s establish that as a given. Furthermore, at least for now, the battery weight won’t allow for high density passenger loads. So while they come to market, that’s helping insurability. As for challenges, well firstly, I think there’s going to have to be a shake out of manufacturers and certifiable models. It takes billions, and that’s not an exaggeration, quite literally billions, to certify an aircraft model. And the FAA is particularly careful with certification post-max and giving these new technologies. So I think as a wait and see, it remains to be seen which manufacturers and which models emerge. It is quite possible and probably likely that many of these startups are simply going to run out of cash along the way. So on that basis, we have nothing really underwrite yet other than prototypes and investment and R&D and those types of things. But secondly, I think there’s some significant questions around certification for pilots for these. Some of these have wings and they can be installed in the crew segment and flight. So I doubt the FAA is going to allow anything less for these models than they allow now for aircraft. And I think some manufacturers are struggling with that. Their value proposition is autonomy. And the FAA really isn’t there yet. And lastly, as a challenge, I think we have quite a bit to learn about repairability and operational resilience. I think these units will have a place, but it remains to be seen if they can stand up in a high usage commercial setting. Yeah, and that’s something only time will tell, right?
0:16:30
I think so.
0:16:31
We’re in the early stages, but like I said, it’s very exciting. It’s a very exciting period. And that’s really aviation’s always been about,
0:16:38
you know, innovation.
0:16:39
It all started out with pioneers trying out new things and we wouldn’t be where we are today without that. But, you know, with today, our increased technology, we can try to make that as safe and less prone to all the accidents that happen in the Wild West of the early days of manned or powered aircraft flight that the Wright brothers and their predecessors had. So it’s interesting.
0:17:08
It’s interesting. Is it the Jetsons yet? No, it’s not. But will us aviation insurers be the auto insurers of the future? Well, there’s a possibility of it. So I look, I think it’s really cool and I think it’s really exciting. It is.
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And I, uh, I D I definitely appreciate you and your company’s stance on being proactive. I’m excited about it and definitely want to be involved with it. And, um, and so I’m, I’ve been following it and appreciate, you know, insurers like yourself and others that want to step forward and be a part of it rather than avoid it and help bring it to fruition. We’re a specialty insurer. Aviation, aerospace is all we do. So it’s a good place for us to be on a board on something like that. Absolutely. I want to go to another subject that’s kind of been a hot topic and it’s come up in interviews I’ve had with other aviation folks that aren’t in the insurance part of the industry, but there’s been a lot of discussion. Some call it frustration about insuring older pilots in the aviation insurance market today, particularly in higher value, certainly higher powered turbine type aircraft and others. But each insurance company, you know, has a slightly different perspective and guidelines that they use, but you know it is an issue for most all aviation insurers. So why is this becoming a bigger challenge with insurers now than it has in the past? And what really is driving that and the result we’re seeing today?
0:18:40
Well, look, we have to recognize that the demographic is moving to the right, per se. bell curve of pilots is getting older, especially owner pilots. There’s not as many newer pilots coming in, but there are a lot of pilots that are aging and they still have aircraft. Many of them are points in their life when they can afford aircraft or have more time to fly than when they had families. So I think it’s a natural development, but I also think, Tim, it’s important to note that it’s not unique to aviation insurance only. In auto, for example, if you’re a driver that’s less than 25 years old and older than 60, you pay some of the highest premiums. So this issue has been around for as long as insurance has been around. and there’s been several studies, is that with age, there’s reduced reaction time. It isn’t a matter of opinion, it’s just a hard reality of getting older. We’re all going to face that at some point, including yours truly here, and I’m going to hit it before you wilt, Tim. Yep. And much like some of the other industry-wide hurdles we’re contending with, cost of repair, downtime, parts availability, more litigious society, general rise in cost. This issue is just another component we underwriters have to consider in risk selection. So those are just the facts. I mean, like them or not, they’re just the facts. Now, as for what pilots can do, as for what can be done about it, well, which I’m sure is going to be a follow-up question that you’ll have. For pilots, as with any risk, things like currency, training, setting personal minimums, using a flight risk assessment tool or some equivalent process is just best practices anyway. Knowing your limits, sometimes maybe that means getting a more appropriate aircraft to your mission and ability. All that will help keep you in the air it’s all a matter of perspective and being reasonable and presenting your reasonableness to an underwriter will help you procure insurance from the carrier broker perspective there are other ways you can handle this things like deductibles two crew men or pilots liability only I mean those are just a few options to consider. And, you know, look, lastly, let me just say this, nobody and I’m included in this likes to be told they can’t do something. But there’s a difference between saying you can and saying we won’t where this doesn’t fit our risk appetite. Now, we’re never going to tell someone they can’t fly, but we may have to make the choice not to ensure. Every underwriter has a slightly different risk appetite and a slightly different portfolio profile. Now as for global, at least for light aircraft are concerned, we don’t non-renew based on age and I don’t know if you know that, but we don’t. In fact, we’ll continue to provide some levels of coverage for as long as you fly, as long as there’s no major changes in risk. Statistically, generally, what we see is if there’s no major changes in risk to him, we don’t have a worse set of loss experience with those life-threatening problems. So I think, look, as a specialist, we do our best to understand that and do our best. But I do understand it’s a tough topic. It is, and one thing that we really didn’t bring up, but you guys are accountable as well to people, and those are reinsurers or, in your case, the pool companies that participate in your program. And they underwrite the results that you guys produce, and that’s got to be a factor on underwriting today.
0:22:51
I think the underwriting of the underwriters has been as high as it’s been in some time,
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isn’t it?
0:22:57
Well, you know, look, I think so, and I think because there’s pressure points. I think there’s been some, what we call back year deterioration. Some older losses have deteriorated and cost more than we had reserved them for or thought that they would cost us. There’s a couple of large losses that have yet to crystallize that are hanging over the industry, but quite frankly, are more money than the industry takes in an aggregate. And, you know, then there’s all these other things I talk about, the increasing cost of claims and the more litigious environment that we’re in, liability claims, inflation. We have some runaway verdicts on things that go to trial where we really think that they’re unfair. But look, these are things we have to contend with. So when you throw these other things in the mix, I mean, they’re all things we have to pay attention to. And as I said to you before, our job is to collect money from the masses, pay the unfortunate losses of the few, cover our expenses and hopefully retire some money. Those that provide us the capital that’s required to do this, do this job. So that’s what we’re all after. And it’s a complicated job to do. So all of this stuff goes in the mix. Aging pilots, look, that’s just one little bit of that. Yeah, and, you know, similar to that, you know, older aircraft are facing increased scrutiny and, you know, more people don’t want to insure, certainly in turbine, on the turbine side, older aircraft and or they’re not doing it on new ones or they’re limiting coverages that are optional. Again, different insurers have a different perspective on that, but you want to touch on what you’re seeing there and some of the issues you’re facing as an insurer on older,
0:24:51
at least, turbine aircraft?
0:24:53
Yeah, so there’s a couple of things. In some cases, older aircraft end up in commercial settings where they have high cycles and are more prone to loss activity, yet they have a lower insured value, so they don’t generate premium to pay what we call attritional claims, whether it be lightning strikes or hail damage that they seem to be more prone to. So they tend, they tend to have a little bit worse experience in terms of, you know, their, their whole losses. Let’s, let’s just say it that way. Uh, but the other aspect of that is there’s now becoming an ESG aspect of that. You know, I think the people that are the pool members of global have some pretty strong ESG policies. I mean, I think a lot of people read that insurers maybe shouldn’t insure coal plants or things that are not ESG friendly. Well, look, we’re not there, but we do want to pay attention to ESG and try and underwrite a greener portfolio. People that loan us capital ask us. So that’s that’s another factor that’s starting to come into play for older. Yeah, and that’s going to be and that’s going to go beyond insurance one of these days, I’m sure. But I mean, yeah, I think, you know, what I hear you saying and obviously I’ve heard before is, you know, on older turbines, especially, it’s a low insured value and it still costs as much or more to repair in addition to be more prone to losses?
0:26:27
I mean, is that kind of the.
0:26:28
You know, in many cases, it does cost more because there are some models where you can’t get parts now. Yeah, those parts have to be tooled up and manufactured. So a small claim can total in old aircraft because it has a relatively low insured value and the cost of repair that is going to be extremely high. So it can be a losing proposition for on-riders.
0:26:55
That’s good information. Well, we’ve tackled some exciting new technologies and new things. And you’ve really taken head on some of the bigger questions that people in the industry are frustrated with. So I appreciate you doing that. Just trying to be respectful of your time. Is there anything we didn’t cover
0:27:11
or any closing thoughts you have about aviation insurance in this market? No, other than I appreciate what you do with these podcasts and I appreciate what you do training and educating the youth, you and the EIA. I think that’s remarkable and somebody has to take that mantle on and it’s a good thing. So thank you for your time. Yeah, well, thank you. And obviously Global and yourself are a huge supporter of the Aviation Insurance Association and these educational programs. You put a lot of your people through our core principles course in addition to hosting it. So thank you for what you do as an insurer and again thank you for your time today and for being kind of a market leader on in some of these areas. I know you’re well respected in the industry and I appreciate your time today. Thanks Tim. Well, that’s all for this episode in this interview. Join us again next time as we continue navigating the waypoints in aviation insurance. Until then, enjoy clear skies and unlimited visibility. Thanks for listening to the Aviation Insurance Podcast. If you found this episode of value, please share it with someone who would benefit from this information. Don’t forget to subscribe in your podcast player so you don’t miss any new episodes and to help our show have more impact. This episode is brought to you by AERIS Insurance Solutions, your flight plan for navigating the turbulence of aviation insurance. For more information, visit aerisinsurance.com. That is www.aerisinsurance.com. Disclaimer, these episodes are for educational purposes only and due to the changing regulatory and legal nature of the business, some information may change over time. Having a well-educated and experienced aviation insurance broker on your team is an absolute requirement to success in business and for managing your aircraft and aviation business requirement to success in business and for managing your aircraft and aviation business risks.
