Category: Aviation insurance · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed 2026-06-05
Aviation product liability insurance covers manufacturers of aircraft, engines, components and aviation accessories, and providers of maintenance, repair and overhaul (MRO) services, for legal liability arising from death, injury or property damage caused by defects in their products or services.
Category: Aviation insurance Also known as: aviation products liability, manufacturers and aviation products liability, AVN 98 cover First codified: Lloyd’s wordings from 1950s; AVN 98 series wordings Related legislation: Consumer Protection Act 1987 (Part I) [1]; Montreal Convention 1999 [2]; Civil Aviation Act 1982 [3]
Aviation product liability (‘aviation products’ in market shorthand) covers the legal liability of an aviation manufacturer, supplier or service provider for damage caused by a defect in its product or service. The class extends to aircraft manufacturers (Boeing, Airbus, Embraer, Bombardier and others), engine manufacturers (Pratt & Whitney, Rolls-Royce, GE Aerospace, CFM, IAE), component and equipment manufacturers (avionics, undercarriage, hydraulics, cabin interiors), MRO organisations performing line and base maintenance, and providers of ground services and aviation fuel where the service contains a defect causing aviation damage [4][5].
The principal exposures are catastrophic: a defect in an engine, structural component or critical avionics that contributes to a hull-loss accident can result in claims of hundreds of millions or billions of dollars for personal injury, property damage, hull loss, business interruption to operators and consequential losses to airlines. Modern aviation product liability programmes for major manufacturers are accordingly placed at high limits — often US$2bn or more per occurrence — with capacity drawn from the global aviation insurance market and substantial reinsurance support [4][5].
The product is governed in the UK primarily by the Consumer Protection Act 1987 (Part I), which gives effect to the EC Product Liability Directive 85/374/EEC and imposes strict liability on producers for damage caused by defective products. Additional liability arises under common law negligence and (in many sales) under the implied terms regimes of the Sale of Goods Act 1979 and Sale and Supply of Goods to Consumers Regulations 2002 [1][6].
The Consumer Protection Act 1987 (Part I) implements the EC Product Liability Directive 85/374/EEC and imposes strict liability on producers for damage caused by defective products. A ‘defect’ is defined in s.3 as a product being unsafe to the level a person is entitled to expect, taking account of marketing, instructions, anticipated use and time of supply. The producer is liable for personal injury, death and certain property damage (subject to a £275 threshold) caused by a defect, with limited defences in s.4 (the ‘development risk’ or ‘state of the art’ defence being the most important) [1][6].
The Montreal Convention 1999 is principally a carrier liability convention but has implications for product liability claims. Where a defect in an aircraft contributes to a Convention-covered loss, the carrier’s strict liability under Article 21 attaches to the carrier, with the carrier’s recourse against the manufacturer governed by their commercial agreements. The Convention’s exclusivity provisions can affect product liability claims brought by passengers; the manufacturer is generally not a Convention carrier and so the Convention’s strict-liability ceiling does not apply to claims against it [2][7].
Civil Aviation Act 1982 (section 76) imposes strict liability on aircraft owners for ground damage; the owner has a right of indemnity against the operator and (potentially) against the manufacturer where a defect contributed to the loss. The product liability regime under the Consumer Protection Act 1987 applies in parallel to the section 76 strict-liability regime [3][6].
For the manufacturer, an additional dimension is exposure to grounding losses: where a defect in a delivered aircraft type is so serious that the regulatory authority (the CAA, EASA, FAA or other state of registry) grounds the type, the operators face substantial loss of earnings and the manufacturer faces claims for those losses under the commercial terms of the sale or lease. The post-2018 Boeing 737 MAX grounding is the leading recent example and is reported to have resulted in claims and settlements in the order of US$20bn for Boeing alone [5].
A major aircraft or engine manufacturer places its product liability programme through specialist aviation brokers in the London, Bermuda and US markets, with a complex tower of primary and excess layers reaching to total limits in the order of US$2bn–US$5bn per occurrence. The wording is typically AVN 98 series, modified for the specific exposures of the manufacturer (with carve-outs for asbestos liability where historical exposure exists, for grounding losses where the manufacturer prefers to self-insure or use alternative risk transfer, and for cyber-related exposures where the wording is still developing) [4][5].
Underwriters require highly detailed disclosure: aircraft and engine types in production, fleet population in service, claims experience, certification history, regulatory engagement, supply chain risk management, quality assurance procedures and product support arrangements. Premium is typically a function of the manufacturer’s revenue, the in-service fleet and the claims history, with major manufacturers paying tens or hundreds of millions of dollars in annual premium. Premium is often spread over multiple years through long-term agreements or rolling ‘evergreen’ placements [4][5].
Claims handling for aviation product liability is among the most complex in commercial insurance. A single hull-loss event can generate multi-billion-dollar claims across passenger liability, hull, third-party ground damage, business interruption to airlines, grounding losses to other operators of the same type and (in catastrophic cases) regulator-mandated design changes for the existing fleet. Claims typically run for many years, involve concurrent litigation in multiple jurisdictions and require coordination between the manufacturer’s legal team, the lead insurer, the reinsurance market, the carrier and its insurers, the air accident investigation authorities, and the relevant regulators [5].
Aircraft manufacturer cover: the largest sub-class, covering airframe manufacturers and their tier-1 suppliers. Programmes for Boeing, Airbus and Embraer are among the largest single placements in the global insurance market.
Engine manufacturer cover: separately placed by the major engine manufacturers (Rolls-Royce, Pratt & Whitney, GE Aerospace, CFM, IAE), with substantial capacity dedicated to the engine sector and complex coordination with airframe manufacturer programmes.
Component and avionics manufacturer cover: for the suppliers of major systems and components, often with lower limits than airframe and engine programmes but still in the hundreds of millions of dollars.
MRO and overhaul cover: for organisations providing maintenance, repair and overhaul services on aircraft, engines and components. The wording typically covers both the defects in services performed and the defects in components supplied as part of the MRO process.
Aviation fuel and consumables cover: for suppliers of aviation fuel, lubricants and consumables. The wording responds for liability arising from defects in the supplied product that cause damage in aviation use.
A UK-based aerospace component manufacturer supplies critical undercarriage components to all major commercial aircraft manufacturers. Annual revenue is approximately £450m and the in-service fleet contains components manufactured by the company on over 8,000 aircraft worldwide. Aviation product liability cover is placed for US$1.5bn per occurrence on an AVN 98 family wording, supported by a tower of primary, excess and reinsurance layers led by Lloyd’s aviation syndicates. Annual premium is approximately US$12m. During the policy year, an undercarriage failure on a commercial flight (the cause being attributed in part to a design defect in the company’s product) results in a hull loss with no fatalities but extensive insurance claims; the company’s product liability programme responds for its allocated share of the loss after apportionment between the manufacturer, the airframe original equipment manufacturer and the operator. Figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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