Spartacus Max captive insurance drone Aquiline Drones

How this Connecticut drone maker became a captive insurance company

What do you do if you can’t find another company to insure you at a rate or level of coverage you’re comfortable with, or if you can’t find an insurer, period? Become a captive insurance company.

That’s what Connecticut-based Aquiline Drones Corporation did. And in doing so, Aquiline says it is the first drone company in the U.S. to self-insure products, services and affiliates.

Aquiline is an American drone manufacturer and cloud solutions company that claims a lot. Founded by CEO Barry Alexander, Aquiline’s offerings include creating an aviation cloud for commercial drones, providing drone “maintenance-repair-overhaul” services and selling the line of Spartacus drone products. It also runs a drone training academy and has a very fledgling ‘drone-on-demand’ service enabling customers to order drone services through a proprietary mobile app.

And now, it’s got an insurance subsidiary too.

Spartacus Max captive insurance drone  Aquiline Drones
Aquiline has the exclusive rights to Manufacture the Altura Zenith in the US and renamed it the Spartacus Max. Photo courtesy of Aquiline.

What is a captive insurance company?

A captive insurance company is a wholly-owned subsidiary of another larger company that does something generally unrelated to insurance. Rather than use a major insurance provider like State Farm or Progressive, major companies effectively set up their own insurance arm, using their own subsidiary to insure themselves. They can cover a wide range of risks for that company. And like any other insurance company, they are subject to state regulatory requirements including reporting, capital and reserve requirements.

British Petroleum, media giant Thomson Reuters and Verizon are among the major companies that have their own captive insurance companies. The Walt Disney Company has two captive insurance companies, Buena Vista Insurance Co. and Alameda Insurance Co., to fund a variety of risks, such as providing workers compensation for employees of certain arms of its business, or insuring movie stunts and special effects such as fireworks.

Often, these captive insurance companies are formed if the parent company cannot find a suitable outside firm to insure them against a particular business risk, or simply if it’s more financially savvy to do so giving the costs of other coverage that insurers offer them relative to what’s covered. They also can often provide potentially significant tax advantages, thus improving the company’s potential longevity and profitability.

Why Connecticut is important in the captive insurance world

State specific legislation means that you cannot simply set up your own captive insurance company anywhere, and in fact only a handful of U.S. states allow the formation of captive companies. Vermont generally ranks as the number one captive domicile in the U.S., but another state nearby — Connecticut — is also perceived favorably.

Barry Alexander, CEO of Aquiline. Photo courtesy of Aquiline.

The Connecticut Captive Law, which passed in 2008, largely enabled that. And Connecticut’s captive insurance-related regulation has continued to iterate.  2014 legislation expanded the types of coverage that a branch captive can write. Then, a 2017 law gave the state insurance commissioner discretion to allow captives (except risk retention groups) to maintain less than the required unimpaired paid-in capital and surplus, which was perceived as helpful in allowing some captives to apply for a certificate of dormancy if they paused or ceased business.

And because of Connecticut’s insurance laws that set it up as a world-class Captive Domicile, some point to the state as being a center for innovation in captive formation and thinking.  By the end of 2020, Connecticut had 22 captive insurance companies.

In 2022, the state got its first drone-related captive insurance company. Aquiline says their influence could set up Connecticut as ‘The Drone and Insurance Capital of The World.’  

How Aquiline’s own insurance subsidiary works

After a rigorous licensing process, Aquiline Drones, which is based in Hartford, Connecticut, was able to establish its own insurance subsidiary called Aquiline Drones Indemnity Corporation (ADIC). The process was done through the State of Connecticut Insurance Department.

“Captive insurance companies have been around for more than 100 years, but the drone industry is flying into new territory,” said Fenhua Liu, Assistant Deputy Commissioner, Captive Insurance Division for the Connecticut Insurance Department.  “Aquiline Drones has broken new ground by creating ADIC to assume the risk of its entire group of companies.”

With its own insurance license, Aquiline Drones is now able to assume the risk of its entire group of companies, indemnify its continuum of products and services, and insure the risk of its partners and affiliates, which currently include Drone Volt (ALDRV) and Aerialtronics. 

Perhaps more relevant to the broader drone industry is that now Aquiline is able to compensate professional drone service providers who use the company’s products across the nation in the event they cause harm, loss or pose other legal challenges.

With its newfound position Aquiline can write insurance policies to cover multiple lines of commercial drone operations under the company’s risk mitigation and management protocols. And to create those protocols, Aquiline has carried out advanced analytics, data and technological processes derived from the company’s vertically integrated ecosystem of drone manufacturing, cloud-connected drone operations, and drone safety training.

What’s more, expect that Aquiline in the future will provide commercial liability products to the larger UAV industry, both nationwide and globally, adding another competitive drone insurance policy for drone pilots to choose from.

“From our inception, our underlying mission has been to build a full-service drone ecosystem, including an American-made manufacturing plant, drone pilot training academy, aviation-inspired cloud and mobile drone manufactory pod,” said Aquiline Drones Founder and CEO Barry Alexander.  “Our latest accomplishment of becoming a fully functional insurance company raises the bar for drone safety and expansion on a global scale.”

Barry Alexander, CEO of Aquiline. Photo courtesy of Aquiline.

The state of drone insurance in the U.S.

If you live and fly drones in the U.S., the Federal Aviation Administration currently does not require that you hold drone insurance to fly, as is the case in some other countries.

But you should still consider holding a drone insurance policy anyway, as you’ll likely want to receive coverage not just for your own likely equipment, but you want to be covered in case your drone harms something or someone else.

“There are so many hobbyists and inexperienced drone operators out there who haven’t completed any formal drone training, nor do they have access to appropriate and flexible liability coverage,” Alexander said. “Our goal is to introduce various aspects of safety at every level and opportunity in a drone operations environment, for every drone business or individual operator, in keeping them safe and compliant as well as protecting the interest of the general public.”

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