Members of US-based industry body the Aeronautical Repair Station Association (ARSA) are considering forming their own insurance company to save on premiums for product liability insurance.
At least 11 members – 15 are required – have expressed interest in forming a risk retention group (RRG), a captive insurance company providing cover to its members only, ARSA says. The organisation is holding a meeting in July for interested members at which it will form a business plan and decide if the project will go ahead.
ARSA estimates that it needs initial funds of $50,000 to cover start-up costs for the RRG, which would offer its members around $5 million product liability insurance. RRG members' premiums would be invested and used to pay claims made by members up to a certain limit. For bigger claims, the RRG could have the option to purchase insurance from a larger provider, although ARSA says such circumstances are rare.
"There is an inherent risk in any start-up company, but we think there are long-term benefits," says ARSA. "Experts say insurers pay out only pennies in claims for every dollar in premiums paid by maintenance providers," adds executive director Sarah MacLeod.
Source: Flight International