We know in South Africa, Hollard Insurance’s iTOO Special Risks subsidiary offers the most comprehensive cover for commercial drone operations yet, but we found this lawyer’s view of the drone insurance space interesting.
The article was provided by the legal minds at Deneys – Director Paul Cartwright, Michael Homveld, Senior Associate and Associate Jakop Mphofu, and first appeared in FA News.
You might have known Deneys as Norton Rose Fulbright a few months ago, but the South African practice formally company split from its global network in March this year.
The advancement of drone technology has found a multitude of applications within South Africa’s unique operational landscape. From fighting crime to spraying crops and surveying mines, drones have become indispensable tools across various sectors.
The widespread adoption of drones has been driven by their large-scale production and price reduction over time, putting advanced technology into the hands of an ever-expanding user base. This growing market presence means that claims from damage caused by drones and damage caused to drones themselves is set to increase.
This presents a unique balancing act for insurers, as there is a need to address the prevalence of drones and their risks against the backdrop of a South African regulatory landscape that is slow to adapt to the rapid progression of the drone industry.
Regulatory Framework
South Africa was among the first countries on the African continent to introduce dedicated drone legislation. The South African Civil Aviation Authority (SACAA) regulates all remotely piloted aircraft systems (RPAS) under Part 101 of the Civil Aviation Regulations. The regulations draw a distinction between commercial and non-commercial operations and impose a layered framework of registration, licensing and operational requirements.
Under Part 101, all drones used for commercial purposes must be registered with the SACAA, and operators must hold a Remote Operator Certificate (ROC). Pilots are required to obtain a Remote Pilot Licence (RPL), which involves passing theoretical examinations, demonstrating practical competence and meeting medical fitness requirements.
Non-commercial operators flying drones weighing less than seven kilograms are exempt from the ROC and RPL requirements but remain subject to general operating rules. Non-compliance with these requirements can attract significant penalties, including fines and criminal sanctions under the Civil Aviation Act, a consideration that carries direct implications for insurance coverage, as policies may exclude liability arising from unlawful operations.
Flights by non-commercial operators must be conducted within visual line of sight, at a maximum altitude of 120 metres (400 feet) above ground level, and during daylight hours only. Drones may not be flown within ten kilometres of an aerodrome without prior approval, nor within restricted or prohibited airspace. Operations directly over any person or group or within a lateral distance of 50 meters from any person, public roads or gatherings are not permitted unless specific authorisation has been obtained.
Operational shortfalls
While Part 101 provides a reasonably comprehensive framework, the regulatory environment is not without its challenges. The regulations were drafted when drone technology was in its infancy, and the SACAA has acknowledged the need for ongoing modernisation.
Proposed amendments and new regulations have been under consideration for some time, with particular focus on beyond-visual-line-of-sight operations, unmanned traffic management, and the integration of drones into controlled airspace. The regulations need to take into consideration the prevalence of Artificial Intelligence (AI) being used to operate unmanned drone operations.
This evolving regulatory landscape raises the risk of inadvertent non-compliance, which has direct implications for liability and insurance coverage. As operators expand their use of drones, staying compliant becomes not just a legal obligation but a central component of risk management.
Part 101 mandates that all operators conducting commercial drone operations must hold third-party liability insurance. The regulations require that operators “shall at all times be adequately insured for third party liability”, and proof of insurance must be submitted as part of the ROC application process.
This requirement showcases that drone operations carry inherent risks to persons and property on the ground, and that adequate financial protection must be in place before commencing commercial activities.
Some general liability insurance policies in the South African market might exclude damage to property arising from aircraft, and drones are classified as aircraft therefore they may fall within that exclusion.
This creates substantial coverage gaps for both recreational and commercial operators who assume their general liability policy will respond to drone-related incidents.
Some insurers exclude drones outright, while others provide limited cover subject to compliance with all applicable laws and regulations. Such conditions create uncertainty, given how quickly drone rules evolve. A breach, however minor or unintentional, could void cover entirely.
Insurance limitations
Commercial general liability policies may be less accommodating than one might expect, and exclude drone related claims altogether.
For companies adopting drones in their operations, whether for surveying, inspection, logistics, security or media capture, these exclusions pose serious and often unanticipated risks.
With general liability products offering limited protection, specialist drone insurance has become a necessary solution for many operators. However, the South African market for drone-specific cover remains relatively small and is largely serviced by a handful of specialist underwriters and brokers.
Policies typically provide cover for third-party liability, hull damage to the drone itself and, in some cases, payload cover for attached equipment such as cameras, sensors and packages.
Drone Operations in South Africa
South Africa's unique operating environment presents distinct risks. The use of drones in mining operations, game reserve management, anti-poaching surveillance and suburban security introduces hazards not commonly encountered elsewhere.
Technical failure brought on by high wind conditions, extreme temperatures, dust and the sheer scale of operations in remote areas all contribute to an elevated risk profile that must be reflected in policy terms and pricing.
Midair collisions present a further hazard, where manned aircraft such as crop dusters and helicopters used in mining or game management operate in proximity to drones.
The risk of collision or near-miss incidents is material and demands careful consideration in both operational planning and insurance underwriting.
The growing use of drones equipped with cameras and sensors for surveillance purposes, particularly in suburban security and anti-poaching operations, also gives rise to significant data protection obligations under the Protection of Personal Information Act (POPIA).
Operators collecting personal information by means of drone-mounted recording equipment must comply with POPIA's processing conditions.
Few existing policies expressly cover liability arising from data protection breaches, leaving operators with a potentially significant uninsured exposure.
Looking ahead
The South African drone market is poised for significant growth in the coming years. Though the Part 101 regulations SACAA has offer a degree of regulatory certainty, the existing framework faces increasing pressure to evolve in step with the rapid technological developments.
Current general liability insurance products may fall short in addressing the unique risks associated with drone operations, and even specialist policies, though beneficial, can leave notable gaps in coverage.
Drones continue to prove their value across a wide range of industries and recreational use. There is, however, both a clear opportunity and an urgent need for insurers to get ahead of the realities of modern drone operations.
Closing the divide between the rapid technological innovation, the somewhat slow South African regulatory landscape, and adequate insurance protection will be critical to ensuring that the South African drone and insurance markets are able to prevent losses as well as respond adequately when losses do inevitably occur.
