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By Daniel Hays

A helicopter operators' trade group has begun a drive for greater use of sophisticated safety systems by its members, but insurance experts said the effort probably won't push rates lower. Accident rates are already down and despite a few well-publicized crashes, there shouldn't increases for the forseeable future.

While the thought of helicopter transportation is enough to worry at least one risk management expert, most in the insurance industry feel helicopter operations are quite safe and some carriers are even expanding their focus on the sector.

R. Michael Throne, chief operating officer of the John F. Throne & Co. Insurance Marketing Inc. brokerage in Seattle called the helicopter industry "dramatically safer" with operators who are much more sophisticated.

Joe Strickland, global head of Aviation Americas Allianz Global Corporate & Specialty in New York said operators have made "great strides in safety."

However, in the opinion of the former Federal Aviation Administrator J. Randolph Babbitt, additional safety efforts surrounding helicopters are needed.

Last November, before his December resignation, he spoke at an international helicopter safety symposium and advocated for helicopter operations' use of Safety Management Systems, or SMS. According to a copy of his speech on the FAA website, Babbitt noted that in 2010 rotorcraft racked up 220 fatalities in 91 accidents worldwide.

Compared with the 2001-2005 average, the helicopter accident rate fell 30 percent, Babbitt said, calling it a strong step in the right direction, but, "We still need to do more." The FAA is working on an SMS rule for commercial carriers that could be released this year, said agency spokeswoman Alison Duquette.

Working in that direction is the Alexandria, Va.-based Helicopter Association International. The HAI, the largest U.S. helicopter operator group with more than 3,000 members, has combined with the British Helicopter Association, the European Helicopter Association and the International Business Aviation Council to tailor the International Standard for Business Aircraft Operations (IS-BAO) for use by helicopter operators. The fixed wing standard was introduced in 2002.

Stan Rose, HAI safety director, said the changes to the IS-BAO safety code, which requires use of an ongoing safety management system as its cornerstone, became effective in January. HAI is now recommending that members buy the IS-BAO standard for $1,200 and become audited and registered. Additionally, HAI is preparing to perform its own individual audited accreditations for the different types of helicopter operations or "missions." As an example of a mission-specific requirement, Rose said HAI's code would not permit pilots working for news helicopter operations to do reporting.

As many as 80 percent of HAI operators have five or less helicopters. Unlike many bigger fleets which already employ the SMS method of constant attention to incidents with detailed analysis, self-reporting and self-policing, many small firms have not adopted the concept.

Small operators feel "they don't need it because they are too small?that's the response I get," said Jason Saunders, senior vice president of Chartis Aerospace in Atlanta.

Paul O'Ryan, vice president and head of general aviation with Swiss Re Aviation Canada, said many small operations don't see the value of SMS. Those with two or three pilots and two engineers may feel they give the same amount of attention to incidents and to the dissemination of information when they sit down for a cup of coffee together.

Helicopters, he said, are a difficult aircraft to fly. A private pilot could maintain proficiency with 50 hours to 70 hours flight time on a fixed-wing plane, but that would barely be sufficient for a helicopter. A licensed pilot himself, O'Ryan said he does not fly helicopters, "I'm not good enough."

The number of helicopters currently registered with the FAA is 19,829, a small number when compared with the 57,831 multiengine fixed-wing aircraft and 269,380 single engine fixed-wing planes.

Incentivizing safety

Insurers provide varying amounts of help to companies that want to improve their safety. David McKay, president and CEO of USAIG in New York, said his firm has had a longstanding program offering the Performance Vector safety initiative that satisfies IS-BAO criteria providing training for pilots and maintenance technicians.

The multifaceted Web-based program includes webinars on fatigue and alertness management, and the company has a safety bucks program providing some reimbursement for firms that do flight simulator training

Starr Companies in February announced it was launching a Safety Manager Mentoring Program providing helicopter operators with webinars and self-study options, and even a Certified Safety Professional to help them with onsite training in safety areas they are working on or would like to improve. The safety services are included in the premium.

Greg Freeman, Starr Aviation vice president, who describes SMS as a "safety program on steroids," said companies use the system as a sales tool with clients and "everybody is doing it, some more than others."

Industry safety activity, however, is not enough to impress one outspoken critic of helicopter operations.

David P. Willis of the Willis Law Firm in Houston, a personal injury attorney who specializes in helicopter crash cases, suggested industry standards are worthless unless adherence is mandatory and infractions are punished by grounding of aircraft.

He conceded that operators have better equipment than 10 or 20 years ago, but said he still gets cases involving defective parts, poor maintenance and operator error. Pilots, he said, are pushed to fly in unsafe conditions by companies chasing a dollar.

Helicopter emergency evacuation (EMS) operations, Willis said, are among the riskiest because many firms entered the business and their frequent flights are done night and day in bad weather and in good. He was also critical of sightseeing tour helicopters, which he said have a lower pay scale compared to pilots with corporate fleets.

Strickland at Allianz said he felt it was unfair to categorize any industry segment with a broad brush. HAI's Rose pointed out that while medical flights averaged eight to 10 accidents a year in the U.S., over the last 15 years the number of Medevac helicopters has swelled from 250 to more than 850.

Sightseeing operations are safe as well, he said, despite the fatal crashes last year outside Las Vegas and in New York's East River. EMS and tour operators have a lot of self-imposed mitigation strategies, he said.

Chartis' Saunders said when accidents occur in a particular segment it focuses attention on them, but such things are cyclical.

O'Ryan at Swiss Re, who is also involved in the company's U.S. operations, remarked that the EMS and tour flight categories "have had challenges." Operators of helicopters used for offshore and industrial segments, he said, often have a "more robust flight department" and fly ships with a pilot and copilot.

Both Saunders and Strickland said among the more interesting trends in safety is the increasing use of flight data monitoring systems in the cockpit, to capture flight information which firms can view on computers and use to help pilots improve performance.

There was a variety of opinion on the possible rate impact of the new safety standards push by HAI.

Joyce Wignes, executive vice president of JLT Aerospace (North America) Inc. brokerage in Chicago said each operator is individually rated but a safety management system "could have an effect on rates."

Most experts, however, seem to be of the opinion that any impact would have to wait on an improvement in insurers' loss ratio on helicopter operations. At that point those companies who have invested in safety management systems IS-BAO and HAI accreditations "will enjoy favor in a tighter market," said Brad Meinhardt, managing director of aviation for broker Arthur J. Gallagher Risk Management Services Inc. in Las Vegas.

Saunders said operators' safety efforts could reduce coverage costs "if rates were at a more reasonable level."

HAI is not linking its effort to insurance cost. "We are very careful to tell people that this program is not designed to reduce their premiums, said Rose, but the organization does believe "a reduction in the rotorcraft accident rate will eventually lower the premium rates."

The key factor in rates is capacity, as insurers have recently been drawn to underwrite aircraft and helicopter operations. German-based Allianz entered the U.S. market in 2006 and Australia's QBE last May entered U.S. general aviation, including helicopters. As recently as October 2011 Swiss Re opened a U.S. general aviation underwriting office in New York so it can focus on "a growth area" said O'Ryan.

His firm has insured for up to $25 million, pricey helicopters used to service oil rigs, but where an insurer once used to get a 5 percent rate on a $1 million rotorcraft, now, he said, it might get 2.5 percent on a $20 million airship.

Brokers and insurers said it is impossible to generalize aboutpremium rates because helicopter uses are so different, with such uses as logging, power line patrol and firefighting ,and fleet sizes vary, so premiums can range from a few thousands for small operations to millions of dollars for larger ones.

Meinhardt said that compared with fixed-wing aircraft, helicopters tend to be more expensive to insure, noting that the damage portion on a corporate fixed wing jet might amount to "pennies per $100 of insured value" compared with$1 or even $1.25 per $100 on a corporate helicopters.

Larger fleets will typically have a large insurer providing a major chunk of coverage with coinsurers agreeing to follow the lead underwriter on claims and underwriting decisions.

Despite the safety efforts of operators and their insurers, helicopters remain a scary prospect for some.

Scott B. Clark, immediate past president of the Risk and Insurance Management Society Inc., who is risk and benefits manager for the 40,000 employee Miami Dade County school system, said when his schools superintendent once boarded a chopper for a hurricane damage inspection tour it caused him "great angst" as he was "very concerned with the risk of having my superintendent up in a helicopter."

Asked why, he mentioned a Feb. 23 Internet video of a helicopter falling apart after landing in Para, Brazil. "Did you see that?" he said.

DAN HAYS has written for newspapers and magazines for more than 30 years. He can be reached at riskletters@lrp.com.

May 1, 2012

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