1. Drones – Insurance Implications
March 12, 2015 – PAMIC – Nittany Lion Inn
[click for next slide]

2. Agenda Part One Overview Reported and Potential Uses
Potential Exposures and Coverage Issues
ISO Activity
Endorsement Options
Rating Considerations

3. Drones as an Emerging Issues
“By failing to prepare, you are preparing
to fail.”
Benjamin Franklin

4. Drones as an Emerging Issues
What is an emerging issue:
New phenomenon: nature and effects are relatively unknown
E.g., nanotechnology
New risk: nature and effects are relatively known but involve unique characteristics
E.g., hydraulic fracturing
Potential Impact:
May go beyond existing underwriting and risk management best practices
May go beyond existing actuarial calculations

5. Drones - An Overview

6. What Are Drones The FAA Modernization and Reform Act of 2012 defines:
Unmanned Aircraft System (UAS) - an unmanned aircraft and associated elements (including communication links and the components that control the unmanned aircraft) that are required for the pilot in command to operate safely and efficiently in the national airspace system
Unmanned Aircraft (UA) - an aircraft that is operated without a possibility of direct human intervention from within or on the aircraft

7. Technology And Design Types Flight Features Navigation Fixed wing
Quad rotors and octo-copters
Micro air vehicles (MAVs)
Flight Features
Mini: low altitude, short duration
Tactical: low to medium altitude, up to several hours, line-of-sight
Strategic: medium to high altitude, hours to days, long- range
Navigation
Remote control ground station
Automation systems
Satellite data link
Source:
Source:

8. Drones – Reported & Potential Uses
“We’re not talking Internet retail giants anymore”

9. Reported And Potential Uses
Military
Intelligence gathering
Combat missions
Law Enforcement And Security Surveillance
Crime investigation
Border protection
Security of commercial properties
Neighborhood watch
Source:

10. Reported And Potential Uses
Search And Rescue Operations
Search and rescue
Delivery of supplies and food to disaster areas
Agriculture
Monitor crops
Locate livestock and assess available forage
Crop spraying
Source:
Source:

11. Reported And Potential Uses
Communications
Movie filming
Sporting events
Delivery
Packaged goods and other mail
Photography
Real-estate
Weddings
Inspection
Insurance claims evaluation
Infrastructure evaluation (e.g. bridges and dams)
Underwriting inspections (e.g. roof)

12. Drones – Potential Exposures & Coverage Issues “Just to name a few”

13. Potential Exposures - Liability
Bodily Injury And Property Damage Liability
Potential defect in design or manufacture
Collision with persons or property
Interruption in data-link transmission communication failure
Personal injury
Invasion of privacy
Trespass and nuisance
Infringement and defamation

14. Potential Coverage Issues - Liability
Provisions expressly addressing aircraft under the ISO CGL today?
Coverage A
An exclusion with respect to the ownership, maintenance, use or entrustment to others of aircraft
Some limited exceptions may apply
Coverage B
No exclusion expressly addresses aircraft

15. Potential Exposures - Property
Property Exposures
First-party property damage
Perils of aircraft and falling objects
Business interruption losses
Hacking

16. Potential Coverage Issues - Property
Property Coverage Issues
Under the ISO Standard Commercial Property Policy:
Property not covered provisions address aircraft as property not covered if operated principally away from the described premises as well as personal property “while airborne”
Specific provisions exist with respect to loss caused by physical contact of an aircraft; including caused by objects falling from an aircraft
Business Interruption
With respect to direct physical loss to covered drone(s), “period of restoration”?
Are the “operations” new to the risk?

17. Potential Exposures and Coverage Issues
What About Other Lines of Business?
Homeowners?
Businessowners?
Farm?
Cyber?
Workers Compensation?

18. Drones – ISO Activity “Endorsement options and rating considerations”

19. New ISO Liability Exclusion Endorsements
Optional exclusion endorsements – ISO GL
Coverage A only
Delineates existing aircraft-related exclusion
Coverage B only
Introduces exclusion addressing Unmanned Aircraft
Coverage A and B
Combines aspects of Coverage A and B options

20. New ISO Liability Exclusion Endorsements
Optional coverage endorsements – ISO GL
Coverage A only
Delineates existing aircraft-related exclusion
Adds schedule to designate:
Drones for which the exclusion will not apply
The types of projects or operations the above exception will be limited to
An optional designated aggregate (sub- limit) when coverage will apply

21. New ISO Liability Exclusion Endorsements
Optional coverage endorsements – ISO GL (Continued)
Coverage B only
Introduces exclusion addressing Unmanned Aircraft
Adds schedule to designate:
Drones for which the exclusion will not apply
The types of projects or operations the above exception will be limited to
An optional designated aggregate (sub- limit) when coverage will apply

22. New ISO Liability Exclusion Endorsements
Optional coverage endorsements - ISO GL (Continued)
Coverage A and B
Combines aspects of Coverage A and Coverage B only endorsements
Optional designated aggregate applicable to both coverages A and B
Similar options were also introduced for use with the ISO Commercial Liability Umbrella Program (sans the designated aggregate limit options)

23. Drone Rating Considerations – Liability
Limited Data on Non-military Drone Losses
Crashes
Bodily Injury
Property Damage
Will all crashes yield one or the other -- or both?
Location
Rural
Urban
Drone Characteristics
Size
Capabilities and Operations (photography, spraying, payload capabilities)

24. ISO Drone Activity Filed GL/CU/CX endorsements end of 2014
To become effective 6/1/2015
Reviewing topic for following LOBs
Commercial Property
Businessowners
Farm
Commercial Inland Marine

25. Questions?

26. Commercial Casualty Product Development
Contact Information
William “Billy” Mauro
Director
Commercial Casualty Product Development
ISO
No part of this presentation may be copied or redistributed without the prior written consent of ISO. This material was used exclusively as an exhibit to an oral presentation. It may not be, nor should it be relied upon as reflecting, a complete record of the discussion.

27. End Slide