Man-made losses within the aviation sector have been trying for the industry. However, according to the International Air Transport Association, total global air travel demand increased nearly 6 percent year-on-year in 2014. Emerging risk management issues, like supply chain risk, are important given the continued increase in air traffic. 

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To help you recognize the real risks for aviation and aerospace companies, Mark Heath, Head of Aerospace and Security, UK, and Richard Powell, Regional Head of Aerospace Claims, EMEA, offer this advice:

Aerospace and aviation companies should proactively manage the risks of ‘rotables’, the aviation term for components and inventory items that can be repeatedly and economically restored to fully serviceable condition. Crucial questions to answer include: Which rotables should be taken out and replaced? How often? And when?

Aviation and aerospace companies must keenly understand each component’s working lifespan, also referred to as the “mean time between failures.” It’s important to stay ahead of the game when it comes to maintaining, repairing, and replacing components given how many different products make up today’s aircraft. It’s not just the engine or the cockpit instruments—it’s the whole plane, from the passengers’ seats to the aeronautical data needed for a successful flight.

Supply chain issues can lead to rotables risks—and to liability risks as well. If a rotable manufacturer goes out of business or loses production capabilities, this can affect the supply chain. Often, the rotable, such as a fuel control unit, is made up of smaller components. So the little guy with a problem impacts the entire supply chain. It’s important to remember that airline management is held responsible when a component or components fail. There may be a degree of culpability lower down the supply chain, but it’s up to airline management to put a contingency plan in place to ensure they can function in the event of a supply chain issue.

Demand for air travel has increased over the past two years, straining aviation capacity and components. Surprisingly, while insurance protects aircraft operators on a ‘per occurrence’ basis, manufacturers of aviation products have to live with aggregate limits on their policies. This means that manufacturers may not be protected by their insurance if a number of liability losses erode the coverage limit over time. To provide true protection for manufacturers, AIG has recently introduced an innovative aerospace liability product that offers up to $50M in coverage per occurrence, with no aggregate limit, for manufacturers of non-critical aviation components. To learn more about Non-Aggregated Aerospace Product Liability from AIG, click here.

AIG aerospace specialists partner with our clients to provide products and services that can help reduce these risks. To learn more about how to reduce aviation and aerospace risks, download the original article below.

    The content contained herein is intended for general informational purposes only. Companies and individuals should not solely rely on the information or suggestions provided in this article for the prevention or mitigation of the risks discussed herein.