How many underwriters are presently offering terms to US Based PC12 owners?
At present there are six players underwriting PC12 insurance domestically, American International Group (AIG Aviation), Global Aerospace, Phoenix Aviation Insurance Managers, US Specialty, USAIG, and W. Brown. Four of these underwriters maintain offices in the Atlanta metro area making for easy access if you are in the area. These markets each have their own underwriting philosophy towards the PC12 and the various mission profile the aircraft fulfills, further each market has varying limits they will extend to these operations. An Illustration of estimated market share reveals a relatively balanced market participating in the $1.4 Billion dollar market.
In the last 60 days there have been some interesting developments within several of these markets which is great news for the aviation insurance consumer. At AIG Aviation a number of their top executives have departed and are forming a competitive underwriting team backed by C.V. Starr to be based in Atlanta. At USAIG, their president just departed with a senior management following and a similar scheme to underwrite general aviation exposures with an office rumored to be in Atlanta. What this means is additional capacity to the market which at best will stabilize rates and add competitive pressures to those underwriters looking to maintain market share as well as grow. As in the past vigorously lobbying of the PC12 with these new underwriters will be crucial in the early days of their respective start ups. Rest assured, I will have our PC12 serial 370 N78PG in their reach to better understand our favored mount.
How does the Cape Town Convention affect my PC12 from insurance prospective?
The Cape Town Convention (CTC) has created new international laws governing transactions involving subject aircraft and engines that change or supersedes conflicting laws within a country governed by the Treaty (also referred to as a “Contracting State”). The Treaty addresses transaction issues including perfection of ownership, security interests/liens and possessory rights such as leases, default, remedies and insolvency.Aircraft and engines subject to the Treaty include: (1) Aircraft that are type certificated for at least eight (8) persons including crew; or goods in excess of 2750 kilograms (6,062 pounds); (2) Helicopters that are type certificated for at least five (5) persons including crew; or goods in excess of 450 kilograms (990 pounds); and (3) Aircraft engines having at least 1750 lb of thrust or at least 550 rated take-off shaft horsepower. The Treaty does not contain any provisions for registering propellers. International interests under the Treaty include aircraft sales, aircraft security agreements; aircraft lease agreements, aircraft conditional sales agreements, aircraft liens, assignments, subordinations etc.
CTC established an International Registry that allows registration of international interests in aircraft and equipment that are subject to the Treaty. The International Registry is located in Ireland, but registration is performed through its website: www.aviareto.aero. The computer driven system is available 24 hours per day, 7 days per week. Unfortunately title searches have now become more expensive for aircraft/engines subject to the Treaty. Not only must the FAA Registry be searched to confirm aircraft/engine registration and status of pre-Treaty liens etc., but the International Registry will also need to be searched. Additionally, it is also taking a longer time to receive the results of a title search because the International Registry is not processing such requests as quickly and efficiently as one would expect. Hopefully this delay is simply the result of the International Registry’s infancy and will be reduced as the International Registry becomes more adept at processing such requests. Each party to an aircraft transaction will need to register as a transactional user entity (“TUE”). The one-time fee for this registration is $200.00. If a party anticipates more than two subject aircraft transactions within the next five years, it will be more cost-efficient register for the five-year period and pay the $500.00 fee. Each party will need to use a single computer for the registration because the International Registry assigns a digital security certificate for the transaction that the TUE must download. The same computer must then be used to complete the transaction. Registration approval should occur within 48 hours. However, the initial volume of TUE registrations has resulted in a delays of several days for receipt of a TUE registration approval. Once registered, a TUE may also appoint a professional user entity (“PUE”) to assist with transmitting information to the International Registry. PUE’s include title companies, attorneys, aircraft tax consultants, title and escrow agents etc.
Parties to a PC12 transaction will still need to file transaction documents with the FAA Registry. In addition to such documents as a bill of sale, application for registration, security agreement, lease etc., FAA Form 8050-135 will also need to be filed in order for the FAA to provide the parties with an authorization number to complete the transaction with the International Registry. If a prospective interest has been filed, the transaction documents must be recorded with the FAA Registry within 60 days of the filing of the prospective interest with the FAA Registry.
Once the authorization number is received from the FAA Registry, a party must log on to the International Registry’s website and complete an electronic form asserting an international interest against the subject aircraft/engine. The International Registry will then send an e-mail message to the second party to the transaction seeking consent to the filing. If the second party consents to the filing, a permanent record of the registration will be created at the International Registry and perfection is then completed. This record can be searched and will appear as an interest in the subject aircraft/engine(s). If the second party does not consent or does not respond to the International Registry’s e-mail message within 36 hours, then no interest is created or perfected.
CTC has definitely added costs to transactions involving PC12s. In addition to the costs of registering as a TUE, the International Registry charges registration and search fees for a subject aircraft ranging from $35.00 to $100.00. This does not include the increased attorney and title fees a party will incur to comply with the Treaty’s requirements. Insurance claims involving a total loss could be delayed until fillings with the International Registry are complied with for the PC12 owner further delaying the claims handling process for those who are non compliant.
Now the law of the land CTC must be complied with if a party wants a properly perfected and enforceable interest in a PC12 subject to the Treaty. The avalanche of TUE registrations following the March 1, 2006 inception have resulted in delays, a number of General Aviation trade groups have suggested that the US Congress increase the seating configuration and weight requirements in order to exempt the many twin-engine and jet aircraft that are currently subject to the Treaty. However, such a change will most likely not occur anytime soon, if at all. Current and prospective PC12 owners who are entering into a transaction involving any aircraft/engine(s) subject to the Treaty should consult with an aviation attorney familiar with the Treaty to make sure that the transaction is documented appropriately and properly recorded with both the FAA Registry and the International Registry. This action will help you avoid delays in claim handling in the event of a total loss of your PC12.
