Posted: 04.21.2009
From Crisis Comes Opportunity

These innovative companies are aggressively seeking opportunities where they can successfully and profitably apply their extensive engineering talent and attentive customer relationship management styles to the Aerospace, Defense, Medical and Alternative Energy industries.

There is no doubt that the current economic conditions are having a profound impact on our country’s manufacturing segment. Our nation is painfully waking up to the harsh reality that the “Big Three” have not been builders of cars for years but rather, they have been constructors of assemblies developed and manufactured by a vast array of suppliers. These supply chain vendors, from such diverse sectors as precision tooling, electrical component builders and furniture makers, are keenly aware of the fragility of their existence and their co-dependence upon a volatile customer relationship prone to rapid contraction.

While basic survival dominates many manufacturers’ today, others are busy transforming their companies by “making lemonade from lemons.” These innovative companies are aggressively seeking opportunities where they can successfully and profitably apply their extensive engineering talent and attentive customer relationship management styles to the Aerospace, Defense, Medical and Alternative Energy industries. From a risk transfer perspective, each of these areas presents unique coverage structures not present in many insurance programs.

Example of diversifying into the aerospace sector

One of the first issues is that ISO 9001 quality certification is now inadequate and that AS 9100 is required. This certification is costly but fortunately many states / regional economic authorities have substantial grant monies available to assist those companies who will continue their business within the State. In addition to the need for correct certification as required by their clients, entry companies will be asked to be AS 9100 certified when purchasing their aerospace liability insurance. While change is happening in this area, many insurance policies contain aviation product exclusions triggering the need for specialty policies aimed at the specific exposure and customers often require much higher limits than these companies are used to carrying. Further, these policies are typically worded on a “claims made” versus traditional “occurrence basis” necessitating solid insurance expertise and communication during purchase and program maintenance. 

Beyond the special coverage terms and conditions, understanding challenging production materials and meeting AS 9100 standards, often divulges the need for a company to coordinate business entity control with their legal team.  Often the creation of separate corporations to isolate specific associated risk away from the general corporation can be vitally important in coming years should a production contract be lost or a divesture of the company take place. Closely communicating insurance issues with a legal team so that the attorneys can promote proper entity structure can be worth hundreds of thousands of dollars should corporate direction shift. It is not unheard of for discontinued products coverage to cost more than $100,000; an easily avoided issue with pro-active expertise.

From crisis comes opportunity. Each of these emerging industries can yield profits and employment security during today’s unstable times and well into the future. The challenge and opportunity of each drives home the value of using your Brown & Brown agent or broker as a Trusted Adviser. 

Phillip M. Lyon
Vice President Commercial Insurance
Technology Practice Leader
Brown & Brown of Detroit

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