WHAT IS THE POTENTIAL OF HAVING TO COME UP WITH ADDITIONAL CAPITAL IF THERE ARE TOO MANY AAIRRG CLAIMS IN ONE YEAR?
AAIRRG’s actuaries examined 15 years of NTSB data and opined that AAIRRG should expect 2.6 claims per year. Typically, there is a great amount of latency in aircraft products claims, with claims from year one are not reported until at least year three. By that time AAIRRG’s pro forma indicates that AAIRRG will have retained in excess of $10M (net of the major expense of reinsurance). Since AAIRRG only retains the first $500,000 of exposure to each claim, the expected financial exposure would be $1,300,000 ($500,000 x 2.6 claims). That equals 13% of anticipated revenues.
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