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OCR for page 23
23 Overall, a costbenefit analysis is generally conducted dents indicated a lack of coverage for professional liability, before the decision to retain risks. Large and medium airport and all categories are unlikely to cover cyber risks. operators also evaluate the affordability of such techniques and tend to have a stronger appetite for risk retention than do smaller facilities. SELECTION OF DEDUCTIBLES Current airport operator deductibles fall in line with each ASSESSING THE VIABILITY OF SELF-INSURANCE airport classification's appetite for risk as evidenced in the prior section. Fourteen of 19 airport operators indicated The majority of airport operators use costbenefit analysis property deductibles ranging from zero to $100,000. Figure to determine the appropriateness of risk retention. Survey 7 shows property insurance deductibles for all size airports. results indicated that, once an airport facility has chosen to The number of respondents indicating a deductible range, for self-insure, the frequency of analysis of the viability of self- each size range, is shown in the chart. insurance depends on the type of coverage or particular line of insurance. Some survey participants indicated that they do not probe the viability of their risk retention programs. In stark contrast, other airport operators assess the viability of self-insurance every year. Four of the six large airport operator respondents indi- cated that the frequency of a costbenefit analysis depends on the line of insurance. The remaining large, self-insuring airport operators perform analysis to validate risk retention every year. As with most of their larger counterparts, half of medium airport operators stated that frequency of costbenefit analy- sis depends on the line of coverage. The other half indicated that they do not conduct such analysis. FIGURE 7 Property insurance deductible levels, all airports. Although no small airport operators reported self-insur- Liability deductibles follow a similar pattern to the prop- ance for primary lines of coverage, five of seven small air- erty insurance deductibles--clustered at the lower end of port operator respondents indicated that self-insurance is the spectrum, even for the larger airport operators. Figure 8 evaluated based on the line of coverage. The remaining air- shows deductible-level choices for liability insurance. port operators do not conduct such assessments. Overall, the frequency of risk assessments to determine the viability of risk retention programs is dependent on the line of insurance; however, it is clear from survey responses that some medium and small airport operators do not con- duct analysis into self-insurance at all. FORGONE COVERAGE TYPES When asked to point out any gaps in their facility's coverage, most respondents indicated that their airport does not insure cyber-related risks, and six of 12 respondents indicated that their airport does not carry coverage for professional liabil- FIGURE 8 Liability insurance deductible levels, all airports. ity; six had no pollution liability coverage. Another type of frequently forgone coverage includes law enforcement Workers' compensation deductibles tend to run slightly errors and omissions. higher. Eight of 15 airport operators answering this part of the question reported workers' compensation deductibles Overall, large airport operators are not covered for pollu- ranging from zero to $100,000. Figure 9 shows deductible tion risks. Both medium and large airport operator respon- level choices for workers' compensation insurance.

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24 The survey instrument shows that large airport operators tend to carry higher workers' compensation deductibles in comparison with deductibles for property and liability lines of insurance. Some medium airport operators also carry high workers' compensation deductibles; however, medium airport operator deductibles for property and liability hover in the zero to $100,000 range. Small airport operators are more risk averse, with most holding deductibles no higher than $100,000 for any lines. This survey was conducted in the midst of a "soft" insur- ance market wherein insurers are pricing coverage low and probably not offering substantial premium reductions for FIGURE 9 Workers' compensation insurance deductible levels, all airports. higher deductibles. As a result, this survey may understate the "appetite for risk" of the airport operators over the long term.