Cyber-attacks, reckless pilots and privacy breaches are fundamental threats to the drone industry, according to a report published by Lloyd’s, a global specialist and reinsurance market.
The drones sector is emerging as a dynamic and important segment of the global aviation and aerospace sector, with global expenditure on acquisition expected to double to $91 billion in the 10 years to 2024.
Civil and commercial use of drones is growing and meeting an expanding range of applications; agriculture, public services, logistics, wildlife protection, media, research, infrastructure and utilities are among the domains in which the drones are being deployed.
Currently, standard drone insurance programmes can cover third party liability – compulsory in the European Union for drones that weight more than 20kg – in addition to physical loss and damage to the system components during operation or transit.
These insurance policies can be tailored to suit individual exposures and may also include executive liability, professional indemnity, employers’ liability, product liability, cargo liability, terrorism, war and hijacking.
However, concerns remain regarding safety, security and surveillance, which needs to be considered by manufacturers and users of this technology, says Lloyd’s new report, Drones Take Flight.
Five fundamental risks that could harm the sector’s growth and future prospects include, privacy infringement, fragmented global regulations, airspace control & collision avoidance and cybersecurity issues – especially pertinent given the security risk posed by a hijacked drone or unmanned aerial system (UAS) infected with malware.
Kent Chaplin, Lloyd’s Asia Pacific chief, noted: “Drones are now used across a number of commercial sectors such as agriculture, infrastructure, film, logistics, and security services and we expect demand for insurance to surge as the commercial applications and take up expand.
Commenting on providing insurance for drones, Chaplin added, “Lloyd’s syndicates can offer cover for physical loss and damage and liability risks and the Lloyd’s market continues to develop new solutions to support this emerging sector.”
Privacy infringement is cited as the most significant concern, when considering the as well as the carelessness of drone operators and the vulnerability of the drones themselves to cyber-attacks.
Another key concern highlighted in the report is the fragmented international regulatory environment, which is developing but is not yet harmonised across international jurisdictions. In addition, the rapid and uneven growth of the drones industry is making it difficult for regulators to provide rigorous oversight without technological support to track and monitor use.
Effective airspace control and collision avoidance technology will be key requirements for the insurance of drones operating in busy airspace, the report contends.
As a result of all this, insurers are likely to seek greater risk mitigation measures from drone operators, along with systems for training and accrediting operators. Insurers and regulators are also likely to seek the strengthening of cybersecurity measures, as well as the completion of privacy impact assessments.
Commenting on the report, Nick Beecroft, a manager of Emerging Risk & Research, said, “Drones have significant potential but at the same time they are a controversial emerging technology. As the market for drones continues to grow, so does the interaction of risk exposures.
Bereft added, “Manufacturers, operators and regulators will need to work together, on a global basis, to understand exposures and ensure this technology is used safely and responsibly.”
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