Aviation insurer Allianz Global Corporate & Specialty (AGCS) has released a report detailing the effect of unmanned aircraft systems (UAS), more popularly known as drones, on the insurance and aviation industries. By 2020, the global drone insurance market could be worth US$1 billion.
According to the report, titled Rise of the Drones: Managing the Unique Risks Associated with Unmanned Aircraft Systems
, as the technology improves and drones become smaller and cheaper, there will be a surge in the number of drones flying the skies.
Data from the US Federal Aviation Administration (FAA) predicts that by the end of 2016, there will be 600,000 UAS for commercial use in the US. This is three times the number of registered manned aircraft. The FAA expects an additional 1.9 million drones flown for recreational use.
Drones can lessen the number of accidents as they can accomplish menial or dangerous tasks, such as inspecting building roofs. They can also be used to assess construction or disaster sites, such as at the explosion site in Tianjin, China in 2015.
However, the proliferation of UAS could open up new risks, such as mid-air collisions and loss of control.
“There have already been enough incidents and near-misses to date involving UAS to generate concern that the likelihood of collisions and other loss events will grow as numbers multiply,” said James Van Meter, aviation practice leader at AGCS.
Incidents involving drones could lead to huge losses. For example, even a small UAS can cause up to US$10 million in damage if it hits the engine of an airplane. There are also concerns about terrorism, as UAS could be used to target critical infrastructure such as nuclear power stations or live events.
Drone insurance is rapidly growing to cover the various risks presented by UAS. This is alongside calls for stricter regulation of drones, such as car-style registration schemes, and standardized training for drone pilots.
AGCS projects that by the end of 2020, the drone insurance market in the US could be worth over US$500 million. Globally, this could be close to a billion dollars.
“Whether you run a coffee shop or a truck delivery business you need insurance to run your business,” Van Meter added. “Drones are no different. Commercial operators of UAS will require at least $1 million of insurance coverage to protect against risk exposures.”
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