Drone Operations & Regulation Update

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1 Drone Operations & Regulation Update 2016 Atlanta RIMS Conference February 25, 2016 Atlanta, GA Carson Lyons, VP-GPLM, General Aviation AIG Aerospace

2 Disclaimer Certain statements provided herein are based solely on the opinions of AIG and are being provided for general information purposes only. Any opinions provided on economic trends should not be relied upon for investment decisions and are solely the opinion of AIG. Certain information may be based on information received from sources AIG considers reliable; AIG does not represent that such information is accurate or complete. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forwardlooking statements presented herein are valid only as of the date of this document and are subject to change. AIG is not soliciting or recommending any action based on any information in this document. 2

3 AIG Aerospace Key Facts and Figures (as of February 2015) 3

4 A Unique Insurance Partner for UAS Operators 4

5 A Unique Insurance Partner for UAS Operators 5

7 Regulatory Status in the U.S. Today General Requirements for Operators

8 Three Non-Military Types of UAV Operations Operational Requirements Vary Public Operations (Government controlled includes public universities) Civil Operations (Commercial businesses, private universities, non-profits, etc.) Model Aircraft (Hobby or recreational use only) 8

9 Public Operator Requirements Hold Certificate of Authorization (COA) Requires an application to the FAA and a comprehensive operational and technical review Typically has specific use, location, and/or operational limitations (e.g. altitude and proximity to airports) Have aircraft properly registered and marked 9

10 Civil (non-recreational) Operator Requirements Hold Section 333 Exemption or be operating a certificated aircraft Includes general conditions and limitations for the operation of UAS Hold Certificate of Authorization (COA) Specific operations Blanket operations Have aircraft properly registered and marked An FAA certificated pilot 10

11 Model Aircraft (Hobby/Recreation Only Flights) Strictly used for hobby/recreation flights Operated in line with general safety guidelines Flights below 400 feet, visual line-of-sight etc. Permission from airport operator/control tower if flown within 5 miles of an airport NEW! Registration and markings Recommend by industry task force in November Interim Rule announced on 12/15/15 and went into effect on 12/21/15 Applicable to all UAS between 0.55 and 55 pounds Registration for previously purchased UAS was required by February 19, 2016 New purchases must be registered prior to first flight 45,000 registrations completed within first two days; 181,000 in first two weeks; 342,000 registrations reported by FAA on February 16 th Civil penalty of up to $27,500, a criminal fine of up to $250,000, and imprisonment up to 3 years for non-compliance. 11

12 What is involved with this registration? 12

13 Drone Registration Step 1: Create Account 13

14 Drone Registration Step 2: Verify Account 14

15 Drone Registration Step 3: Create Profile 15

16 Drone Registration Step 4: Acknowledge Some General Safety Guidelines 16

17 Drone Registration Safety Guidance Provided During Registration I will fly below 400 feet I will fly within visual line of sight I will be aware of FAA airspace requirements I will not fly directly over people I will not fly over stadiums and sports events I will not fly near emergency response efforts such as fires I will not fly near aircraft, especially near airports I will not fly under the influence 17

18 Drone Registration Step 5: Pay 18

19 Drone Registration Step 6: Review Order 19

20 Drone Registration Step 7: Receive Your Registration Number 20

21 Drone Registration Step 8: Review Your Certificate 21

22 Drone Registration 22

23 Requirements Common to ALL Operators Must not endanger persons or property on the ground Must give way to manned aircraft Must comply with all flight restrictions and Temporary Flight Restrictions (TFRs) Your campus might be under one! Stadium Flight Restriction Commences one hour before the scheduled time of the event until one hour after the end of the event and is applicable to ALL aircraft Applicable to a 3 nautical mile radius and up to 3,000 feet above ground level (AGL) of any stadium having a seating capacity of 30,000 Notable impact to MLB, NFL, NASCAR, INDY CAR, and NCAA Division I football Waivers are available but require specific approvals and authorizations All operators are subject to legal enforcement action for careless and reckless operations 23

24 What Comes Next/Where Are We? Public and Commercial UAS Operations Moving Ahead

25 What to look for in 2016 Interim Rule for UAS registration announced created a dual numbering system Non-hobby aircraft still to receive a unique, aircraft-specific registration number Hobby operators only given a personal registration applicable to all of their aircraft Section 333 operators able to access new registration system on or near March 31, 2016 Commercial/sUAS rules (new FAR Part 107?) to be released late spring/early summer In a House Subcommittee meeting on 10/7/15, FAA Deputy Administrator, Michael Whitaker, said June 17, 2016 is a solid date for a final rule being in place Final rule being in place doesn t necessarily mean the same as final rule is implemented Final rules likely to mandate some formal training and/or testing for most (if not all) nonhobby/recreation operators, as well as many components of the February 2015 NPRM FAA Reauthorization Act what will final act include? Passed House Transportation and Infrastructure Committee on Feb. 11th goes to House floor in coming weeks. COA receipt changes, Risk-Based Permitting, Micro-Drone amendment and other points 25

26 Who Regulates UAS FAA or State/Local Government or Both? 45 states considered 168 drone use related bills in 2015 Some legal debate on the FAA s authority over non-navigable airspace State and local governments began passing laws and ordinances specific to UAS as early as 2013 FAA releases State and Local Regulations of Aircraft Systems (UAS) Fact Sheet in mid-december States that FAA has complete authority to regulate the areas of airspace use, management and efficiency, air traffic control, safety, navigational facilities and aircraft noise. Provides some non-specific examples of state and local laws affecting UAS for which consultation with the FAA is recommended, such as restrictions to flight altitudes or flight paths, and mandating UAS-specific equipment or training. Several cities have passed laws placing stringent restrictions on drone use What does this mean? It will need to be decided whether state/local laws conflict with the regulatory authority granted to the FAA by Congress Can, or will, having multiple drone regulatory bodies in place (FAA, state, local gov t) have a negative impact on safety? Something to continue watching 26

27 Exposures and Coverages Why the need for Insurance? How are you covered today? What might you need to change or modify?

28 The first step in the risk management process is to acknowledge the reality of risk. - Charles Tremper

29 Liability Exposures Bodily injury and property damage Consequential losses Catastrophic loss potential Non-owned use of unmanned aircraft Personal Injury 29

Privacy Exposures Unreasonable searches/surveillance Trespassing Invasion of privacy Intrusion upon

coverage can be considered, but operator should have policies, procedures and guidelines in place for

preflight risk mitigation procedures in place.

30 Privacy Exposures Unreasonable searches/surveillance Trespassing Invasion of privacy Intrusion upon seclusion Publication of private facts Stalking and harassment Business privacy Personal injury coverage can be considered, but operator should have policies, procedures and guidelines in place for the collection, storage, use, and destruction of data collected by the aircraft, AND have good preflight risk mitigation procedures in place. February 2015 Presidential Memorandum released from White House Established Executive Branch multi-stakeholder process to establish best practices for commercial use of UAS 30

31 Liability Exposures TRADITIONAL AVIATION EXPOSURES Bodily injury and property damage Consequential losses Catastrophic loss potential Non-owned use of unmanned aircraft Personal Injury / Privacy NON-TRADITIONAL AVIATION EXPOSURES Errors & Omissions/Professional Liability Cyber 31

32 Physical Damage Exposures Aircraft Payload Ground control equipment Spare parts 32

33 33

34 34

35 35

36 War Exposures Unmanned aircraft can face war risks Malicious attack Hi-jacking Spoofing Sabotage Very different exposure potential than what we are used to as aviation underwriters 36

37 BUYing UAV Insurance What is the process for getting coverage in place?

38 B.U.Y.ing UAV Insurance: Simple Points for the New Operator The Three Key Players Broker They work for you and strive to find the best coverage options available by accessing multiple insurance markets on your behalf. Underwriter Works for the insurance company itself and reviews information provided by the broker to determine coverage availability and policy pricing. You The information you/the operator provide to your broker, and the relationship you develop with him or her (and in some cases even your underwriter) can be the key to a successful placement. No one knows your operations better. Complete app and provide any additional information you feel tells your story better. 38

39 Underwriting Considerations UAV underwriting is based on traditional aircraft underwriting foundation Almost all aviation underwriting stems from four basic points of risk analysis. Operator experience Make and model information Purpose of Use Location of Operations Values and limits required Aircraft Payload Ground Equipment Operational procedures/risk mitigation items Training 39

40 The Three Es of AIG Aerospace s New UAS Specific App Using Our Experience and Industry Knowledge for Mutual Benefit Risk/Account EVALUATION Broker/Operator/Prospect EDUCATION Safe Operation/Flight Planning ENCOURAGEMENT 40

41 Claims Challenges / Claims Handling

42 UAS Claims Challenges? New and different New exposures/uses represent new claims scenarios Regulations and laws (FAA, State, Local) Manufacturer assistance Maintenance Who was the operator/pic? Theft/Fire/Disappearance Underwriter/Broker/Insured intent vs. policy language does it match? Valuation of components? Prior experience? How many UAV claims have been adjudicated? How many have you handled or helped to mitigate? 42

43 Conclusions The Future is Here

The Final Message Steady growth in UAS activity throughout 2016 beyond No way for Transport Canada, the FAA, EASA, CAA or anyone else to know for certain how many UAS operators we will see We only

44 The Final Message Steady growth in UAS activity throughout 2016 beyond No way for Transport Canada, the FAA, EASA, CAA or anyone else to know for certain how many UAS operators we will see We only know that with there being a potential benefit to nearly all industries, the number of potential UAS operators and types of exposures are immense We don t know all that is to come, so flexibility, adaptability, coverage development, and commitment to the unmanned industry are key Regulations Larger system commercial approvals/mass introduction and use Loss trends Societal acceptance Future needs 44

45 The Final Message AIG s Key Differentiators AIG has the commitment, expertise, product development capability, and passion needed to help move the unmanned systems industry into the future. Commercial UAS Operator AND Insurance Carrier Global reach and capabilities Product enhancement/additional product line development 45

46 Questions/Discussion

47 The data contained in this presentation are for general informational purposes only. The advice of a professional insurance broker and counsel should always be obtained before purchasing any insurance product or service. The information contained herein has been compiled from sources believed to be reliable. No warranty, guarantee, or representation, either expressed or implied, is made as to the correctness or sufficiency of any representation contained herein. American International Group, Inc. All rights reserved American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries.. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange. Additional information about AIG can be found at YouTube: LinkedIn: AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.

Drone Risk: Four Key Topics for Insurance and Risk Management Professionals

Drone Risk: Four Key Topics for Insurance and Risk Management Professionals Western Carolina RIMS Luncheon October 13, 2016 Greenville, SC Carson Lyons, VP-GPLM, General Aviation AIG Aerospace Disclaimer