Underwriters rate the risks based on such factors as: criticality of the product, Area of utilization, jurisdiction, type of aircraft, volume of turnover, attitude to quality control, contractual obligations, claims experience.

Criticality of the products

High risk examples: undercarriage, hydraulics, control surfaces, engines. Medium risk examples: avionics, fuselage, generators. Low risk examples: galley fitments, seats, carpets, fittings.

Type of aircraft

Civil aircraft risks attract higher rates than military aircraft risks, due to the size of aircraft, passenger numbers, government indemnities, etc.

Volume of turnover

The volume of sales turnover is used as a guide for the amount of Products Liability exposure and to set the premium. Underwriters require both actual turnover of the past years and estimated turnover of the coming year.

Attitude to quality control

A manufacturer’s attitude and approach to safety and quality control helps underwriter to assess the risk and can ultimately help to reduce premiums.

Contractual obligations

Contractual obligations include: indemnities, hold harmlesses, additional insureds, waivers of subrogation, ect. The general rule to establish contractual obligations in Aviation Products Liability Insurance is that there is no cover for any liability which is assumed by contract greater than the liability which would have existed at law if there were no contract unless within the normal business practice of the insured or pre-agreed by insurers.

Claims experience

As with any form of insurance, underwriters will take past claims into account when rating risks.
In the absence of previous insurance, any incidents which may have given rise to a claim (e.g. losses implicating proposer’s products) had insurance been in place must be detailed.

Source: Documents of Willis International Aviation Insurance Course 2010