It’s normal for aircraft companies to outsource a significant portion of their production, relying on a deep supply chain with specialised expertise ranging from critical engine components to phone chargers. This also spreads the risk, as suppliers usually buy aviation products liability insurance in case they’re implicated in a claim.

While some eVTOL OEMs follow the traditional model, others are vertically integrated. They want to keep aircraft design, engineering, manufacturing, and assembly in-house.

Benefits of vertical integration
The rationale is clear: better quality control, faster innovation, and long-term cost reduction as production scales without supplier markups. But there could be a challenge when it comes to liability insurance.

Balancing control and risk
The insurance market works by spreading risk among many, protecting policyholders from unwanted volatility. So when we bring the supply chain under one roof, the risk comes with it, in turn reducing the potential for subrogation (where insurers pursue third parties for liability).

As aviation underwriters review an eVTOL OEM’s liability exposure, understanding how varying degrees of vertical integration affect the risk profile - both positively and negatively - is likely to be key to their assessment.

Image credit: Eve Air Mobility

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