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Emerging Risks

Advanced air mobility is a rapidly developing sector of technology with a plethora of companies working on and developing new, innovative automated aircrafts, from small drones delivering cargo packages to larger vehicles transporting passengers.

The news this week that Southwest Airlines and Archer Aviation have signed a memorandum of understanding to develop operational plans for electric air taxi networks at 14 California airports where Southwest operates has brought the issue of new risks that come with the new technology.

Archer’s Midnight aircraft is designed to transform urban travel, replacing 60-to-90-minute commutes by car with estimated 10-to-20-minute electric air taxi flights. The goal of Archer’s aircraft is to offer a safe, low-noise, cost-competitive transportation option with no direct emissions.

It comes as US aviation firm Joby Aviation revealed its prototype aircraft powered by liquid hydrogen has completed a landmark 523-mile flight. The test flight is believed to be the first forward flight of a vertical take-off and landing aircraft powered by liquid hydrogen.

The potential for both manned and unmanned air taxis has been recognised by the UK government with the Law Commission having begun a review of the laws around autonomous flight, in order to support the safe development of this rapidly advancing sector.

It is clear London Market insurers will have a vital role in the development of air taxis in the coming years as the home of aviation insurance.

Ian Summers, Global Business Development Leader, AdvantageGo.

Senior underwriting and claims executive, at the International Underwriting Association (IUA),  Tom Hughes says that insurers are keen to support advanced air mobility from the research and development stages to the roll out of wider public use, which is likely to be sooner than many think.

Benefitting society – at both in the development and research stage and the roll out to mass public stage.

Hughes is also secretary of the IUA’s Developing Technology Monitoring Group, which focuses on the use and insurability of new and emerging technologies, such as artificial intelligence and connected and autonomous vehicles.

He says “London has always been the home of brand-new complex and very large exposures. The nature of the subscription market means you can insure large risks that you may not be able to place in other areas.

“A limited number of insurers are providing cover for new aircraft and have recognised that there is a good opportunity. They are already thinking about how they can adapt existing products and create new ones.

Hughes continues “It is difficult to know how fast and how quickly the market will develop. But there is so much investment, not just in the UK but globally. It is difficult to believe that advanced air mobility will not be part of our transport network in the future.”

He adds automation is already heavily used in aviation today, such as un-manned drones in the delivery of medical packages and is only likely to continue. Increased automation has the potential to deliver substantial benefits to the entire aviation system, UK industry and the public as a whole. However Hughes adds in order to realise these benefits, the UK’s legislative and regulatory framework needs to be sufficiently agile to facilitate innovation, whilst simultaneously robust enough to maintain the high safety standards that aviation enjoys.

“In our official response the IUA identified two important factors insurers need to enable them to support the safe roll-out of automated aircrafts, both through their trial stages and their gradual production and uptake,” he says. “Firstly, the introduction of a regulatory framework with a robust certification process, that prioritises safety throughout the design, build, certification, maintenance, and use of automated aircrafts.

“Secondly, the necessary data related to the use of advanced air mobility, to adequately quantify the risk posed by their operation and to price insurance policies. However, Hughes recognised that since these types of aircrafts are a brand-new technology there is far less historical data available and other safety information, such as the number and types of passengers, and the amount of weight the aircraft can carry, will be vital.”

Hughes argues that the Law Commission must establish how it can be structured to allow insurers to have access to data to determine liability if an accident were to occur, as if this is not prioritised more disputes relating to liability will inevitably arise.

He points to the recent Automated Vehicles Act, published in May 2024, as providing a template for this question to be addressed. The legislation determines liability for driving offenses and accidents under specific conditions related to the degree of self-driving functions being used. Similarly, recent debates around how product liability laws can be updated to accommodate the use of artificial intelligence in driverless cars could also be applied to aviation.

Hughes says lawmakers must consider safety regulations around the use of batteries and cybersecurity systems as used by advanced air mobility technologies, which could have detrimental consequences should they fail.

“In the IUA’s official response it stated it is important to consider the risks associated with the use of lithium-ion batteries, and any future transitions to alternative battery technology, both within the aircraft itself and the batteries inside products carried by aircraft,” Hughes adds. “Specific challenges exist in respect of thermal runaway and the risk of fire, both for a vehicle in flight and when on the ground, for example a helipad based on a property. These risks must be appropriately assessed and managed.”

Hughes also acknowledges cybersecurity risks, particularly where the technology is connected and/or reliant on external technology have to be addressed.

“It is expected that extensive testing of advanced air mobility will take place to ensure their safety in regard to cybersecurity,” he says. “There will also likely be fail-safes introduced in order for aircrafts to safely land in the event of a potential system failure.”

Hughes adds the creations of an increasingly congested airspace and a potential impact on nuisance and privacy rights are risks that will need to be recognised and factored into the underwriting process. This is despite the fact these new vehicles are generally quieter than traditional aircrafts, and they are likely to operate in much closer proximity to people.

“In order for this technology to develop, focusing on safety is fundamental to ensure the integrity and longevity of the advanced air mobility market,” Hughes adds. “There is a substantial risk that early accidents could deter insurers from engaging in the market and risk denting public confidence in the technology.”

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