Introduction
Every industry, market, and area of insurance has some risks that must be professionally managed. Civil aviation and space are the fields of professional activity with the heaviest risks besides the energy industry and finance. The local insurance market is very competitive due to the conditions described above, and new ways of calculating and mitigating risks appear frequently. Therefore, researching this topic would be beneficial for any businessperson. This paper explores the significance of risk management in the airline and space insurance market and its long, rich, and informative history.
Requirements Posed to Space Insurance Companies
As with other traditional and emerging industries and markets, risk management is an integral element and necessity of civil aviation and space insurance. To be efficient, relevant, and competitive, space insurance companies must meet several industry and market requirements. The study of the topic allowed one to identify some fundamental standards that define a financial protector for civil aviation and space agencies to be considered a reliable one.
For example, they must understand the nature and sources of risk and know how to apply the most appropriate and impactful mitigation strategies (Vorobyov et al., 2021). Moreover, they must be good at basic and advanced risk management approaches, be innovative and knowledgeable, and know the legal nuances (De Leon, 2022). Other requirements include well-honed analytics and forecasting skills.
Risks Uniqueness
Exploration of the topic made it possible to identify the reasons for such requirements for insurance companies involved in protecting businesses operating in the sky and space. The bottom line is that these fields are unique from a conventional risk management perspective. Regarding airlines, natural phenomena are a common cause of damage to properties such as aircraft (De Leon, 2022).
There is also a need for financial protection from liabilities that may arise due to mishaps unrelated to nature (De Leon, 2022). The human factor and imperfect technology are risks, too, as these can lead to the failure of a spacecraft, satellite, or R&D project (Harrington, 2022). Airlines and space insurance organizations cover the cost of these, too.
Transition to a Data-Centric Approach
Analyzing the culture and methods of local risk management made it possible to identify an exciting trend. Today, a new historical stage in risk management in the airline and space insurance markets begins. The data-centric approach is becoming increasingly the prevailing and preferred methodology. More and more companies are incorporating data analytics and machine learning into their policies and practices. The cause of the paradigm shift is the principle of data-centeredness, which allows for assessing dangers, planning responsive measures, and forecasting risks more accurately (Valentin, 2022).
Constantly Changing Market Environment
Another identified pattern in the airline and space insurance market is that it is a constantly evolving and shifting environment. However, this property is not unique to the discussed field since all insurance markets have this feature in their structure (Valentin, 2022). New technologies and regulations are the primary external drivers of change. Therefore, a knowledgeable risk manager is a competent one.
Conclusion
Aircraft and spacecraft risk management has always been particularly challenging compared to other industries and markets. It was because of the overall costliness, the complexity of the affecting external factors, and their interconnectedness. However, in recent years, local insurance companies have found a way to make this process easier and more efficient, and this is a data-centric approach. Modern technologies have allowed them to accurately analyze, predict, and calculate even the most specific hypothetical situations involving risks, accidents, damages, and financial protections.
References
De Leon, P. M. (2022). Introduction to air law. Wolters Kluwer.
Harrington, A. (2020). Insurance as governance for outer space activities. The International Journal of Space Politics & Policy, 18(2), 99-121. Web.
Valentin, L. I. (2022). Current global trends of aviation insurance. National Institute for Aerospace Research, 14(4), 195-200. Web.
Vorobyov, V. V., Sharov, V. D., & Zatuchny, D. A. (2021). Risk management methods in the aviation enterprise. Springer Nature Singapore.