How Insurers Evaluate SMS Programs in Business Aviation

Insurance underwriters increasingly evaluate Safety Management System in business aviation programs as part of routine risk assessment. For many operators, an SMS is no longer viewed only as a regulatory or internal safety tool. It is also a visible indicator of how risk is identified, managed, and controlled across flight operations, maintenance, training, and management oversight. Insurers use SMS maturity as one of several inputs to understand exposure, loss potential, and long-term operational stability.

When insurers review an SMS, they are not auditing for regulatory compliance in the same way as a regulator. Instead, they are assessing whether the operator consistently identifies hazards, evaluates risk, implements controls, and learns from safety data. The presence of an SMS alone is not sufficient. Underwriters focus on how the system functions in practice and whether it influences real operational decisions.

This article explains how insurers evaluate SMS programs in business aviation, what they typically look for, common misunderstandings, and what a well implemented system demonstrates from an insurance perspective.

What insurers mean by SMS in business aviation

In an insurance context, a Safety Management System in business aviation refers to a structured approach to managing safety risk that aligns with FAA 14 CFR Part 5 principles and ICAO Annex 19 concepts. Insurers generally expect to see the core SMS elements even when an operator is not formally required to comply with Part 5.

At a high level, insurers understand SMS as a framework that includes:

• Documented safety policy and leadership accountability

• A defined process for hazard identification and risk assessment

• Ongoing monitoring of operational safety performance

• Formal processes for corrective action and continuous improvement

This aligns closely with how SMS is defined in foundational guidance such as discussions found in What Is a Safety Management System in Business Aviation? and The Four Pillars of SMS Explained for Business Aviation. Insurers rely on these same structural concepts, even if they do not use regulatory terminology during reviews.

Why SMS matters to insurers

From an insurance standpoint, aviation risk is cumulative and systemic. Individual incidents rarely occur in isolation. Insurers are therefore interested in whether an operator can identify emerging risk trends before they result in losses.

An effective SMS demonstrates that the organization:

• Detects hazards early through reporting and data review

• Evaluates risk consistently rather than relying on individual judgment alone

• Implements risk controls that are tracked and verified

• Uses safety data to inform operational decisions

For insurers, this translates into reduced uncertainty. Operators with mature SMS programs tend to produce fewer surprises, more predictable loss patterns, and clearer documentation when incidents occur.

How insurers review SMS during underwriting

Insurers typically review SMS elements during initial underwriting, renewal discussions, or following significant incidents. The review is usually document based and interview based rather than an on-site audit.

Common areas of review include:

• SMS documentation such as manuals, policies, and procedures

• Evidence of hazard reporting and follow-up

• Risk assessment records and mitigation tracking

• Safety meeting minutes and management review outputs

• Training records related to SMS processes

The focus is less on formatting and more on evidence that the system is active and integrated into daily operations.

What insurers look for in hazard reporting

Hazard reporting is often one of the first indicators insurers examine. A lack of reports may signal underreporting rather than a risk-free operation.

Insurers generally look for:

• A simple and accessible reporting process

• Reports submitted by multiple roles, not just safety staff

• Clear descriptions of hazards rather than vague concerns

• Evidence that reports are reviewed and closed

Well functioning reporting programs are discussed in more detail in What Makes a Good Hazard Report in Aviation? and often serve as a proxy for safety culture maturity in the eyes of underwriters.

Risk assessment and decision making

Insurers pay close attention to how risk assessments are conducted and used. They are less concerned with the specific scoring methodology and more concerned with consistency and follow-through.

Key indicators include:

• Defined criteria for severity and likelihood

• Documented rationale for risk acceptance decisions

• Clear assignment of risk ownership

• Evidence that mitigations are implemented and verified

In business aviation, insurers often view consistent risk assessment as a sign that operational decisions are made deliberately rather than reactively.

Differences across Part 91, 135, and 145 operations

Insurers recognize that SMS implementation varies based on operational context.

For Part 135 operators, SMS is typically more formal due to regulatory requirements. Insurers expect documented processes, defined accountability, and routine safety data review.

For Part 91 operators, SMS is often voluntary. Insurers may focus more on functional elements such as reporting, training, and management involvement rather than strict documentation structure. Articles such as Do Part 91 Operators Need an SMS? help clarify these distinctions.

For Part 145 repair stations, insurers are particularly interested in maintenance error prevention, corrective action tracking, and audit processes. The SMS Requirements for Part 145 Repair Stations Explained provides useful context that mirrors many insurance review expectations.

How insurers assess safety assurance

Safety assurance demonstrates whether the SMS actually works over time. Insurers look for evidence that the organization monitors its own performance and responds to change.

This may include:

• Internal audits or evaluations

• Trend analysis of hazard and incident data

• Corrective action tracking

• Management review outputs

The presence of these elements indicates that the operator is actively managing risk rather than relying on static procedures.

Common misunderstandings about insurer expectations

One common misunderstanding is that insurers expect a perfect safety record. In reality, insurers are more concerned with how incidents are managed than whether they occur at all.

Other frequent misunderstandings include:

• Believing that having an SMS manual is sufficient

• Assuming low hazard report volume reflects strong safety performance

• Treating SMS as a compliance exercise rather than an operational tool

Insurers often view transparent reporting and documented corrective actions as positive indicators, even when incidents occur.

What good looks like from an insurance perspective

A strong SMS, from an insurer’s point of view, shows clear alignment between policy, practice, and performance.

Characteristics of effective programs include:

• Active leadership involvement in safety decisions

• Regular use of safety data in operational planning

• Documented follow-through on identified risks

• Continuous improvement driven by internal feedback

These traits align closely with guidance discussed in How SMS Helps Identify Systemic Risk Patterns and What Auditors Look for in an SMS Program, both of which reflect similar evaluation criteria used by insurers.

The role of technology in supporting insurer confidence

While insurers do not require specific tools, technology can support consistency and traceability.

Modern SMS platforms often help operators:

• Centralize hazard and risk data

• Maintain audit trails for decisions and mitigations

• Produce clear documentation during underwriting reviews

• Monitor trends over time

The value of technology is not automation alone, but improved visibility and accountability. These themes are explored further in What to Look for in Aviation SMS Software, which aligns closely with insurer expectations for data integrity.

How SMS maturity influences long term insurance relationships

Over time, insurers develop a profile of an operator based on claims history, safety data, and organizational behavior. A mature SMS contributes to clearer communication, faster resolution following incidents, and more informed underwriting decisions.

While SMS alone does not determine premiums or coverage, it often influences discussions around risk tolerance, deductibles, and long-term partnership potential.

Looking ahead

As SMS adoption continues to expand across business aviation, insurers are likely to rely even more on safety management data to understand operational risk. Operators that invest in functional, well integrated SMS programs position themselves to demonstrate control, accountability, and resilience in an increasingly data driven insurance environment.

A Safety Management System in business aviation, when implemented with intent and discipline, provides insurers with confidence that risk is being managed proactively rather than reactively.