Alexandria, Virginia, March 15, 2006 -- A team led by the Aeronautical Repair Station Association (ARSA) is forming a company that will offer cost-effective liability insurance to repair stations as well as give participants the opportunity to own a stake in the company.
Through ARSA's leadership, some 20 member companies (member/owners) have committed to be founders of the Aviation Alliance Insurance Risk Retention Group (AAIRRG). The group's goal is to secure enough commitments from member/owners to incorporate sometime in the second half of 2006. Participation in the AAIRRG will be reserved for ARSA members.
AAIRRG will not be an ordinary insurance company, but rather a risk retention group (RRG). An RRG is a group of independent companies that band together to create and fund a licensed captive insurance company. An RRG operates under the Federal Liability Risk Retention Act of 1981 (as amended in 1986) to write common commercial liability insurance for its members. Each insured must be an owner of the RRG and all owners must be insured by the RRG.
In AAIRRG, like other RRGs, member/owners will pay an up-front capitalization fee as well as a regular premium. The capitalization fee, projected to be about 30 percent of the member/owner's current annual insurance premium, will help fund the RRG. Each member/owner will get shares in the RRG, which includes eligibility for financial distributions from potential underwriting profits. In addition, AAIRRG offers it member/owners the opportunity to take greater control of their insurance costs.
"The insurance industry views aviation as a special 'high hazard' industry. Consequently, there are few insurers who provide coverage," explained Paul Hawthorne, ARSA's vice president-operations. "As a small subset of the aviation insurance market, when repair stations do find coverage, too often they encounter premiums that represent an average of all aviation exposures. Since repair stations are not often named in liability insurance claims, they end up paying unjustifiably high premiums for their coverage. AAIRRG's goal is to change this."
ARSA is working with The Polaris Group (www.polarisenterprisegroup.com) to administer the formation of AAIRRG. The Polaris Group specializes in evaluating the feasibility of insurance alternatives and facilitating the formation and management of group captives. Plans for an ARSA-led RRG began to take shape in early 2005 when a group of ARSA members expressed interest in forming an RRG. AAIRRG is in the formation stage, gathering commitments from ARSA members to join the RRG when it becomes licensed. AAIRRG must gain sufficient member/owner commitments to secure reinsurance -- insurance for an insurance company -- before it can obtain an insurance license. The company has named an interim board of directors and elected officers.ARSA: The Aeronautical Repair Station Association (www.arsa.org) represents the interests of aircraft maintenance and alteration facilities before the Federal Aviation Administration (FAA), the National Transportation Safety Board (NTSB), other federal agencies, and National Aviation Authorities (NAA) around the world. Its members perform maintenance and alterations on behalf of U.S. and foreign air carriers, as well as other aircraft owners and operators. Founded in 1984, ARSA is the leading provider of regulatory training and compliance information for aviation design, production and maintenance.
