Mountfitchet CEO Oliver Clarry-Risk on his innovative insurance product for the charter sector
The charter industry has always faced a dilemma over what should be done when a charter aircraft goes AOG. Ideally, it should be down to the operator to source a replacement aircraft, even if it is at considerable expense to them, but it’s far easier to cry “force majeure” and leave the customer to hunt for one instead. Obviously letting the customer down is not a smart way forward, and will do damage to the operator’s brand, but for some charter operators that’s the way the risk vs reward equation points, so that’s the way they go. To Oliver Clarry-Risk, a former Lloyd’s of London insurance broker, this dilemma is precisely the kind of situation that insurance is designed to solve.
Insurance loves infrequent but damaging risks of all kinds, it’s what the whole insurance business is designed to provide a solution for. Failure to fulfil a charter because of an AOG incident is not exactly a frequent occurrence, as a risk it is way out there on the bell curve, but when it does happen it generates either a severe expense or reputational damage, or in some instances, both.
“Once I became aware of the problem it seemed to me that there must be some kind of insurable solution to this issue. With this in mind I decided to look into designing a product that would meet the industry’s need,” Clarry-Risk recalls. The up-side was obvious. Operators who bought the insurance product would not have to replace a charter aircraft out of their own pocket, and ensure customer satisfaction by providing a very high level of service, instead of disappointment.
The AOG Protect flagship product that Mountfitchet Risk Solutions offers covers the operator for up to 30% of the full price of the charter if there is an aircraft no-show. So for a $100,000 charter, Mountfitchet Risk Solutions will provide up to $30,000. “That sum covers most, if not all of the operator’s additional outlay, and the product can be tailored so we can go higher or lower in the amount of cover we provide, which then impacts the premium that the client pays,” he explains. By definition the product is bespoke, since the premium evaluation has to take into account the make and model of the aircraft, its age and what the annual charter revenue associated with that aircraft is.
For the AOG Protect policy to pay out there has to be a provable fault on the aircraft to cause the no-show and it could be as simple as the microwave oven playing up or the Wi-Fi not functioning. Mountfitchet Risk Solutions also provide optional additional cover should crew sickness cause the no-show. However, the policy does not cover the kind of situation where the owner of an aircraft decides, to pull it out of charter service at the last moment, because he or she has decided to use the aircraft themselves.
The company is also in the process of finalising an additional “all-risks” cover that would pay out for a variety of additional causes. Clarry-Risk explains more; “If airport staff, for example, decided to strike and closed the air space, locking in the jet that was to be used for the charter, our new product would cover that and a range of other risks”.
According to Clarry-Risk, demand for AOG Protect has been growing rapidly since it was introduced earlier this year. “We have exceeded our targets year-to-date and we have both outbound and inbound enquiries nearly every day for quotes. We are extremely busy, dealing with both European and US customers,” he says. So far the business has signed up several European charter operators and a similar number of US operators, who can now display a Mountfitchet supplied logo on their marketing literature and premises, thus adding visibility to the insurance product.
At present Mountfitchet has just one office in London but Clarry-Risk plans to expand the business with a US office launch within the next year. The product is underwritten in-house but the company is wholly reinsured by Swiss Re, one of the world’s largest reinsurance companies. “Clearly, Swiss Re did a very thorough due diligence appraisal of our business model before they came on board, and that gave us a lot of confidence,” Clarry-Risk notes.
AOG Protect policies are sold on an annual basis rather than a per-charter flight basis, and to date all claims have been settled to everyone’s satisfaction. “This is a reliable business with a clear and readily understandable policy and business model. We do not have to send out loss adjusters to query or check a claim as it is very easy in today’s world to track an aircraft to see if it has flown or not flown on a particular day, and we can do that from our office. So if an aircraft does go AOG, it is a pretty clear cut state of affairs. Once we have all the paperwork and the claim amount has been agreed, we have a standard 10-day payment promise,” Clarry-Risk explains.
So what does the future hold? Clarry-Risk says that there are several new insurance products still at the design stage, one of which he plans to announce towards the end of 2016. The next step with AOG Protect is to build on the current achievements in Europe, open up in the US and then take the product to the Middle East and Asia. He continues “It is my belief that this will turn into a standard “must-have” policy throughout the charter industry. From the customer’s perspective it obviously adds confidence to a charter operator’s service when the customer can see that the product is backed by a bona fide insurance company which secures the service to the customer.”
To find out more about AOG Protect, contact Oliver Clarry-Risk of Mountfitchet Risk Solutions at firstname.lastname@example.org or +44 (0) 208 335 1087