More insurance companies were exhibiting at the LABACE show this year, joining aviation broker Goodwinds, which has had a presence at the fair for the past eight years. Axa announced it had issued 300 polices since it entered the market in June, and as the show’s main exhibition pavilion exploded into end-of-the-day parties, the insurance and reinsurance company’s senior manager was still on her laptop, finalizing another quote.
Goodwinds is not an insurer, but a broker. “There are nine companies in Brazil that write aviation insurance, and we work with all of them. Sometimes if one won't issue a policy, another will,” said broker Ana Mercante, who said that Goodwinds is the largest broker in the segment in Brazil. It’s owned by two commercial pilots who fly for TAM, and its office is located at Congonhas Airport. “Besides understanding the [insurance] product, we understand the aviation business,” Mercante explained. As to the new entrants into the insurance business, she said, “For us, it means more options to offer our clients.”
While many in the aviation business are suffering with the recession, Ana Mercante said, despite the crisis, insurance sales have increased. “The need to avoid risks increases along with the crisis…accidents have alerted companies to the need for insurance, especially as regards third parties.” As is the case everywhere in the world, airplanes that are financed–as well as all others–must (by law) be insured, and she noted that for the owners of higher-end aircraft, insurance is universal.
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Daniela Murias, aviation manager for XL Catlin, said that this is the insurer’s first year of operation in Brazil, and represents part of a “long-term [expansion] plan.” With 10 competitors in Brazil, the goal in the first year is to write GA policies and write airline policies. XL is a syndicate that here in Brazil sells directly to brokers. Ten years ago, said Murais, the Brazilian market was opened to foreign reinsurance companies, “and the availability of reinsurance brings issuing companies. It’s a cycle.” Before that, everything had to go through a state agency, though that agency did use world markets to offset risks.
Murias said that the right amount of insurance is not the legal minimum. “At airports, handlers are only required to have two million Brazilian reals in insurance [about $625,000].” At the end of 2014, a hangar at Congonhas collapsed onto a new Bombardier Challenger 300 and other aircraft, and the hangar owner would have been required to have only that minimum. As Murias observed, “Insurance is expensive, but if you have a loss, it’s cheap.” (All of the insurers at LABACE were sure that insurance had covered that loss, though none knew or would say who had paid.)
Murias said that while insurance is usually standardized, there are discounts for using more experienced pilots, and there is coverage for airplanes classed as experimental (which in Brazil means they have, for example, FAA type certificates but have not been awarded Brazilian ones–perhaps as nobody has yet had reason to apply).
“Aviation is not car insurance,” she continued. “Risk is analyzed case-by-case. It would probably be too expensive, but we could even write insurance for a prototype aircraft [which is one U.S. version of “experimental”]. The risks depend on the class. Proportionately, you’ll pay more for an experimental aircraft.”
Murias also observed that Brazil is not a market where general aviation is notably risky. “If you compare rates, the only country that that gets lower rates is the U.S.” She added that Brazil had a long heritage in aviation and a good safety culture.
