Insuring Aviation Innovation: The First All-Electric Commercial Flight

On December 10, 2019, history was made: The first flight of an all-electric commercial aircraft was successfully completed in Vancouver, BC. 

The flight took place in a de Havilland DHC-2 Beaver (a single-engine propeller plane) owned and operated by Harbour Air. The plane was retrofitted with a magniX magni500 electric motor, which is capable of producing 750 hp. The magniX motor will enable mid-range commercial aircraft to be operated emission-free at lower costs. 

In the months ahead, magniX motors will undergo additional tests and a lengthy regulatory approval process––paving the way for widespread deployment of magniX motors. 

With Technological Advancement Comes Risk

With these rapid technological advancements in aerospace come new types of risks for aviation insurers to grapple with, particularly during the initial testing of unproven products. Inevitably, a new aerospace product will take flight for the first time, and meaningful protection for the designer/manufacturer is crucial at this stage. 

Due to the inherent risks of aviation, a failure during this initial testing can have significant consequences. As brokers, under these circumstances we often find ourselves needing to close the gap between insurers that tend to prefer a "wait and see" approach, and clients that want adequate protection while flight-testing their products. 

Complicating matters further is a tough aviation marketplace with less capacity and much higher premiums than we have seen in recent years. The last hard market arrived in dramatic fashion following the tragic events of September 11, 2001. 

Fast-forward from there a few years, and we find these increased premium levels attracting new players to the aviation insurance marketplace, which created more competition and ultimately set in motion a historic decline in premiums that continued for more than a decade. 

But by 2018, the combination of inadequate premiums and ever-increasing claims costs had resulted in a global contraction of available capacity, as well as sharp premium increases. And more to the point of this article, an underwriting community that is much more selective about the types of risks they will agree to write.

A Case Study in Aviation Insurance

In 2019, magniX turned to Woodruff Sawyer for assistance with its aviation insurance program, having recognized the firm's knowledge and experience in arranging coverage for emerging technology companies. 

The challenge we faced from the onset was to secure an aviation insurance policy that would provide magniX with meaningful protection for these early test flights. 

We contacted nearly every aviation insurer in the US. We sought out carriers willing to meet with magniX to learn more about their products, the business, the design and manufacturing process, and the leadership team. 

Ultimately, we wanted to partner with a carrier willing to collaborate with us in arranging a unique aviation liability product. 

Despite the wide variety of aviation insurance policy forms available, the liability exposure created by this particular set of circumstances with magniX wasn't a good fit for any of them. magniX didn't own the aircraft being operated for the test flight. Additionally, at this stage the motor didn't meet the standard industry definition of a "product" found in a typical product liability policy. 

After more than 60 days of meetings, emails, phone calls, questions, answers, and debates, we did arrive at a customized solution that involved a great deal of modification to the conventional policy wording. 

With insurance in tow, we were excited to watch the initial flight, and look forward to the growth and evolution of magniX as we continue to help the company identify and tackle their unique risks.

How We're Securing the Future of Aviation

Happily, Harbour Air's initial flight test of the magniX motor was a success As we look to the future, Woodruff Sawyer will continue to embrace the exciting changes taking place in the aerospace industry. 

As champions for our clients' success, we will work to identify and diminish business risk through custom solutions, expertise, and advice; continuing our rich 100-year history of insuring inventors, game-changers, and innovators.