As we make our way to the goal, please visit us often for the most recent information. The links below will be updated (click headings to expand).
As we make our way to the goal, please visit us often for the most recent information. The links below will be updated (click headings to expand).
If we don’t raise the money, we can’t get the RRG approved. It’s our best remaining option for obtaining insurance for our sport. We recently learned that the underwriters intend to drop all of USHPA’s insurance policies in March. Without those policies, we have no insurance for pilots, site owners, instructors, schools or USHPA itself. At that point we’re all totally exposed to any future lawsuits. We can’t take that risk.
The sooner we get this done, the sooner we can get the RRG approved and start writing policies to cover pilots, sites and instructors. Waiting just makes it harder to do, and forces us to spend money to speed up the process. There’s no reason not to donate NOW, since donations are refundable if we don’t manage to make this work. March 1 is when our insurance runs out, but in a perfect world we’d already have the RRG up and running TODAY to get through various regulatory delays in different states. We don’t yet, so we’re going to be scrambling to get it all in place as soon as we have the money. Waiting costs us money! The sooner donations come in, the more time we’ll have to get everything in place and ready before flying season ramps up.
Raising the money and forming an RRG is not an easy or inexpensive task. USHPA has been building up its financial health for the past fifteen years. See the board meeting minutes and the financial statements in the members’ section of the website for all the details. We’ve gone from $100,000 in debt to having about a half million dollars in net worth, all the while keeping dues as low as we could manage. We’ve been matching contributions to the Foundation, which has grown from a couple of checks in a shoebox to nearly $760,000 in assets over that time. We’ve been working on financial stability and planning for the long term, but it takes time.
Had we known that our insurers were planning to drop our policies with a year or two of notice, we could have raised money in a more orderly fashion. We didn’t find out until mid-August, and even then it was only when a flight school tried to renew their policy and was turned down. We just confirmed this past week that the insurers intend to drop even our CGL (pilots, chapters and sites) policy.
As long as we could still buy insurance on the market, even with increasing premiums, it was very difficult to justify asking our members for a large dues increase or a major fundraising campaign to self-insure. If we weren’t forced to do this, we probably wouldn’t go through all the expense and trouble. But the time for second-guessing is over; we have one good option left for insurance, and we need to get on with it as quickly as possible.
As a membership association, we’re not able to just “charge everybody”. Condo associations can do that, because they can place a lien on a condo if the owner doesn’t pay up. We don’t have the right to force members to pay extra once they’ve paid their dues for the year. What we CAN do is to ask, and to explain why we need the money. That’s what we’re doing, and we’re counting on our members to understand why it’s important and essential to our future.
The funding so far (exclusive of donations) is a Letter Of Credit on the USHPA office building, a Letter Of Credit on the Foundation’s assets, cash from USHPA, cash from PASA, cash from flight schools. We have a $100,000 top-off donation from a member to finish the funding, and that leaves $830,000 to make up the whole pot. We’re looking to sell our office building, but there’s no guarantee that’ll happen before we need the money.
There are a couple of different ways; first, donations from our members. These are tax-deductible, so the IRS is helping us out to some degree. When you make a donation you get a letter back confirming it, and you can write that off of your taxes if you itemize deductions. We hope that clubs will make substantial donations too. Some clubs are donating amounts in excess of ten thousand dollars to the RRG fund. Every dollar helps.
The other way is to find members willing to lend money to the RRG. These interest-bearing loans are limited by the Securities and Exchange Commission to only people who meet their standards as “accredited investors”. This is because the loans are unsecured “participation notes” which are not a super-safe investment like a Treasury bond.
If you would like to help out with a loan for at least $10,000 and you meet the SEC Accredited Investor requirements, please contact Martin Palmaz at the office to get the documentation. The SEC Accredited Investor requirements are in 17 CFR 230.501, section 5:
Our intent is to pay those loans back in the three-to-seven year timeframe. They’ll pay an interest rate that depends on how well the RRG performs, with a maximum rate of ten percent per year compounded annually. If the RRG does poorly, the interest rate could be zero. The loans can be paid back once the RRG accumulates enough profits to satisfy the insurance regulators.
The more money we raise through member donations, the less we have to borrow and pay interest on. That cuts our long term costs and gets us to stability faster.
We’ve had a number of good ideas suggested for how to raise money, encourage donations and recognize members who contribute with a tangible reward. We’re pursuing some of these, but time is short and we need to get the money together quickly. Every dollar helps, but it’s the slow season right now for flying and we must have this together soon.
Some members are offering to match donations above a certain amount as an incentive to bring in larger contributions. We’ll be offering other incentives as we get them figured out.
For a few years back around 1977-1980 we sold life memberships. They cost $250 in an era when dues were $20 per year. We sold less than fifty of them, and we still have 28 on the books today. They didn’t solve our financial crisis. The board voted back at the time to end them and require a membership vote if they were ever to be allowed again. We don’t think life memberships would raise the kind of money we need today.
Some hang gliding and paragliding businesses have already donated to support the RRG effort, and we’re reaching out to others. We all have an interest in succeeding at this, for the good of our entire sport. International pilots have contributed already, and we hope that our fellow fliers around the world will help us keep our sport thriving and our flying sites open.
There are two distinct funds that support the RRG. First, there’s the $2 million capitalization that we need to have for the insurance regulators to approve us. Beyond that, the RRG will be writing insurance policies and charging premiums to its insured owners. (That’s USHPA, the Foundation, PASA and individual flight schools.) The annual premium income is what will pay the RRG operating expenses and expected claims. If claims are as expected, we should not need to touch the capitalization at all. If USHPA members, chapters and instructors do a good job of managing risk, we should be able to lower the expected claims and decrease the cost of our insurance. The capitalization is there as a guarantee that if disaster strikes, the RRG has the money in the bank to back up the promises made to the policy holders.
The RRG sets its premiums based in large part on the past history of claims, under the direction of an insurance actuary firm approved by the state of Vermont. They’re an independent third party which evaluates the risk and history and establishes the amount of premium needed to cover the expected claims with a high degree of confidence. If the RRG does better than expected, we enjoy lower premiums in the future.
Our current insurance policy is “occurrence” coverage, which means that it covers anything that happens during the policy period ending on March 1, 2016. Anything that happens after that date will fall on the RRG; anything before that goes to our existing insurance coverage.
Yes, they do. Many groups who need specialty insurance use them. CrossFit is one of over 200 RRGs in the USA. Just like us, they have members doing risky things which occasionally result in injuries. To see how they are putting an RRG to work for their protection, watch this video.
Yes. The RRG will offer similar coverage to what we have right now for pilots, landowners, chapters and events.
Insurance protects us as pilots if we damage someone or their property. It protects landowners from claims related to our flying, and many sites require us to be insured as a condition of allowing us to use their property. No insurance means we would likely lose most of our flying sites. Right now, landowners understand that USHPA members have the financial ability to make good on any damage they do, because we have insurance. If landowners didn’t have that assurance, they would be very reluctant to let us use their property.
Instructor insurance does a couple of critical things. First, it protects instructors from losing their savings and other assets if they are sued by an injured student. Students sign a waiver that says they won’t sue, but that doesn’t prevent them from filing a suit; it’s just a tool that can be used to defend against a suit. The other important protection is for landowners. Without coverage for instructors, there was a hole in our landowner coverage. When we obtained instructor insurance we plugged that gap.
At present our coverage for landowners does include instruction. Due to claims history and concerns by the insurers, future coverage for landowners under the USHPA policy will be limited to non-commercial instruction only. Any instruction for pay of any kind will require that the instructor be affiliated with a certified school. The school will have the ability to add a landowner to their policy for coverage of commercial instruction. More on this will be coming in an email to instructors later in December.
It’s an unfortunate fact that aviation is treated differently than other activities. Look at any general liability insurance policy and you’ll find an exclusion for almost everything aviation-related, except flying on a commercial scheduled airline. This same bias carries over into government agencies and corporations, even though what we do isn’t so different from mountain biking, rock climbing or skiing. Our sport is viewed as something far outside of “normal” sports, and it makes outsiders nervous. When in doubt, “no” is the safest answer for a landowner or public agency to use. Insurance is an essential tool for opening and retaining sites.
Most states have recreational land use laws that limit the liability of a landowner who grants permission for the use of their property. Those laws provide a tool for defense in case the landowner is sued, but they do not PREVENT the filing of lawsuits. Defending a lawsuit costs serious money, and it can’t just be ignored. Our insurance program defends landowners if they are sued over flying activities on their land. It pays the legal costs of getting a lawsuit dismissed, and in the worst case, any judgment awarded against the landowner.
For some years we’ve been facing sharp increases in our insurance premiums (130% in the last 5 years), and this has driven up dues. We are expecting premium increases for this coming flying season to be in the range of another 35%. Now the insurers have gone even further, completely dropping coverage for all paid instruction and schools. Part of the reason is accidents, but part of it is how the insurers have handled claims and decided what to pay out when a claim is made.
In part, because we’ve had some serious accidents that injured spectators and damaged property. In part because some students have been injured during training and have sued instructors in spite of our waiver. Another part is how claims have been handled by our insurers. It’s complicated, but in simple terms here’s the problem:
We don’t have a lot of choices; we have repeatedly looked for insurance on the domestic market over the years without success. Lloyds of London is the only place that we have been able to consistently find underwriters willing to write our kind of policy, and they’re the leaders in this field. They have announced that they are unwilling to continue writing policies that cover commercial instruction and schools. We, and the various insured schools, have been looking for alternative carriers for months.
Cutting expenses will help with cash flow for the short term, but it won’t make enough of a difference soon enough to be lot of help. We’ve cut back on everything non-essential. We’ve decided that we’ll publish only six issues of the magazine per year, every other month, at least until we get through this difficult period. We are down to four paid staff and planning to stay there. We are deferring all but essential projects. We will be committing all of our available cash reserves to funding of the RRG, consistent with keeping USHPA running and financially solid.
We thought about dropping all coverage for commercial instruction, but that would mean that all of our major training schools would shut down, and they account for nearly half of the new pilots each year. That would also stop all training at every insured site, and would probably result in some site closures of popular locations. After discussing the likely scenarios, we decided that would be nearly as bad as losing all of our insurance coverage.
The finance/insurance committee and executive committee met in person and by teleconference, and consulted with our insurance brokers, our attorney and our insurers on what can be done. We researched the options as soon as we learned of the non-renewal in mid-August, and presented an outline to the board at the October meeting. Our attorney met with experts in the field of self-insurance and we worked together to develop a plan.
As part of the RRG evaluation process, we hired an insurance actuary firm to review our claims history and determine the amount of capital we need to fund the RRG. We’ve also contracted with a management firm that specializes in RRG operation, and a legal firm which handles the documents and filings necessary to start it up. A big advantage of setting up our RRG in Vermont is that they’re the leaders nationwide in this insurance segment, and they have specialists in the field who do this regularly. Many companies incorporate in Delaware for their business-friendly laws. RRGs incorporate in Vermont, because that state has the most respected and approved regulatory environment and professionals ready to help with management.
No. Reviewing old board meeting minutes, there has been talk of self-insuring since the early 80’s. The problem is that it’s an expensive and difficult process to go through, even though it has the potential to save us money in the long term. As long as we could still buy insurance on the open market at a somewhat-reasonable price, that was better than trying to self-insure. We’re now at the point where buying that coverage is going from expensive to impossible. Self-insurance has become the best available option.
We are unable to provide details due to privacy concerns, confidentiality agreements involving claimants and the pending status of some claims. In general terms, costs have been rising rapidly, claims paid out have been driving those costs, and accidents which cause claims have come from a variety of sources. The single largest pay out to a claimant involved an injury to a spectator. See the claims summary by category here for an overview of our recent history.
If pilots were not crashing into power lines, vehicles, buildings and spectators, claims would be lower. If Chapters did a better job of managing risk at their flying sites, claims would be lower. If students did not file lawsuits over training injuries, after promising that they would not, claims would be lower. If our insurers took a harder line on defending claims that we believe are without merit, instead of paying off, costs would be lower.
Claims are not the fault of a particular wing type. Claims in hang gliding and paragliding are proportional to our membership – Membership: 43% Hang Gliding, 57% Paragliding. Claims: 41% Hang Gliding, 59% Paragliding.
An RRG is a corporation which provides insurance and which is owned by the people it insures. It’s the legally-recognized way to do “self-insurance.” We will control how claims are handled, what to pay and what to fight in court, and how to control the risks we insure. Unlike today, we are in control of our destiny. We succeed or fail on our own terms.
The RRG is a federally-established way to self-insure that is valid in all 50 states. As an RRG, we do not have to become an admitted insurance company in various states, just one state. This significantly lowers the potential cost and administrative burden. Once the RRG is licensed in one state the federal act that created RRG’s allows it to operate in all 50 states. We’re using Vermont because it’s the “gold standard” for regulation and is accepted everywhere in the country.
We sure hope so! Profits in the RRG will first be used to increase the capital amount, then to pay off loans. We hope that within a few years we’ll have enough surplus that we can reduce insurance premiums and return those savings to our members in the form of lower expenses and lower dues rates or better services. If we can reduce accidents and claims, we can direct profits towards advancing the sport instead of growing the bank account of some corporate insurance syndicate. We pay ourselves, and we get to decide how to best apply those profits to support our sport.
The owners will be USHPA, the Foundation For Free Flight, PASA and some individual flight schools. Ownership and management will be shared proportionally to the investment of each in the RRG. It will be managed by a five-member board chosen by the owners. Members of the board will be a Vermont insurance expert, and pilots who are familiar with our sport and issues of insurance, finance and legal. USHPA members do not own “shares” in the RRG individually, but they will share in its profits and success through USHPA membership benefits and future dues rates.
The RRG will pay a management firm in Vermont to handle regulatory filings, and it will pay for auditing and actuarial analysis to maintain compliance with Vermont laws. It will also pay a law firm experienced in our sport to handle claims management and evaluation, with the final decisions made by the board of directors of the RRG. We are designing it to run as lean as we can, to minimize overhead and expenses.
Stability, and lower costs over the long term. Since we own our insurer, we can take the long view. We can quickly settle legitimate claims with minimal overhead. We can fight claims that we believe have no merit, and we can make it clear to future claimants that we will NOT just roll over and pay off to clear the books. If we do a good job of managing risk, we reduce accidents and future claims. That reduces expenses and premiums, and makes us able to reduce dues and invest in growing our sport.
No. And we are structuring this so as to minimize the chance that multiple claims can wipe out the entire RRG. The RRG will pay the first $250,000 of each claim each year. Beyond that, the RRG will buy a “reinsurance contract” to cover the remainder up to the policy limit. The reinsurers are willing to consider this because their risk of loss goes way down since they’re only covering very unlikely high-dollar events above $250,000 – the excess exposure. Even so, changes in our coverage are required to entice them to take this excess exposure.
There are several parts: startup costs to organize it, capital requirements and annual premiums. The basic startup costs for auditing, actuarial analysis, legal expenses and risk management are about $200,000. The capital required is $2 million. The Annual insurance premiums that USHPA will pay to the RRG will be increased by 35% from what USHPA paid in premiums last year – the same number we anticipated as a premium increase from the current insurer, if they were even willing to insure us at all.
USHPA is putting our building up for sale, and has a letter of credit against the building to start off with for $305,000. We are also funding the startup costs of $200,000.
The Foundation for Free Flight is contributing $500,000.
Schools are contributing over $250,000.
We are asking for members to donate to the startup capital fund through the Free Flight Forever campaign.
One member has already pledged $100,000 in the form of a challenge grant.
We run fairly lean right now. We have four paid staff and two contractors to service over 9000 members and produce our magazine. We’re reducing the magazine to six issues per year temporarily to get past the immediate crisis, and we’ll discuss how we may reduce costs long term in that area later. We can’t move to less expensive office space; we already own it, and we’re using the equity in the building as part of our investment in the RRG. We may be able to sell the building and use more of its value, but that could easily be a year or more away. Beyond that, we’re spending as little as we can, consistent with still running the association.
We need to fund the RRG with a capital base of $2 million total. That’s what the actuaries in Vermont have told us, based on their analysis of our past claims history and what they see as our future risk. We believe we can do better than recent history would suggest, but we can’t prove that until we show results. For now, we have to live with our history as it stands.
Dues come in over the course of a year, so an immediate dues increase doesn’t generate cash right away. It will help, but we also have to pay startup costs and a higher insurance premium based on our past loss history. We think that history will improve, but we have to prove that over time. When it does, our premiums will come down, and then we can look at reducing dues to match those reduced costs.
If we can’t come up with the capital through a mix of cash, letters of credit, donations from members and loans, we won’t be able to get the RRG approved to operate.
If we don’t succeed, we can refund donations to the RRG effort, accompanied by a letter that nullifies the tax deduction. You can also choose to leave the money with USHPA to help fund whatever backup plan we manage to come up with to provide some limited level of insurance. We hope it won’t come to that, and if everyone pitches in and does their part, it won’t. We are not planning for failure, but a number of members have asked this question.
Securities rules prevent us from asking the general membership for loans, but we are interested in talking to individuals that meet the SEC requirements found here in Section §230.501(a)(5-6) (definition of an accredited investor). If this describes you and you’re interested, please contact executive director Martin Palmaz for more information.
Our expenses will be going up for two reasons; first, formation costs of the RRG, and second, increased premiums based on our recent past claims history. We think we can show that the recent high level of claims is unusual and can be reduced, but until we actually do that we have to live with our past history as a basis for future insurance premium rates.
$150 for pilots, $294 for instructors, $8 for 30-day student memberships.
The first step was to review the budget and see how much we could cut and still provide essential services to our members. Once we did that, we recognized that even cutting everything possible wasn’t going to get us close to the amount needed, given our increased costs. We cut costs where we could and looked at the remaining shortage. We calculated a bunch of different scenarios, mixing different amounts of dues revenue, site insurance fees and 30-day membership prices. We made some estimates of how many members might drop out at different price points, and worked to come up with a mix that was as fair as we could make it. It was presented to the board, discussed at length and voted on.
Make a contribution! We need roughly $100 per member to make the final push to fund the RRG. Some will give more, some will give less, but if everyone pitches in, we’ll get this thing done. We know that some members can give $1000, and for others $50 is a stretch. Consider what flying is worth to you, and what it would mean to all of us if we don’t solve this insurance problem. Give whatever amount you can, but please do as much as you’re able. This is a one-time effort to get the RRG project off the ground; after that, annual premiums should more than cover expenses.
Name: United States Hang Gliding and Paragliding Association
Government ID/EIN: 23-7171363
Accidents are what cause claims against our insurance. If pilots aren’t crashing into people or property, and students aren’t getting hurt in training accidents, we don’t have insurance claims. 2014 and 2015 have been bad years for accidents and fatalities, and those accident rates have been part of our increased insurance claims. They’ve also caused great concern about the potential for future claims with our insurers, and likely have contributed to the insurers’ decision not renew our commercial coverage.
Yes, things have to change. We need to improve some facets of our instructional programs, and there’s a lot of work to be done yet. USHPA is working with PASA (The Professional Airsports Association) to establish options that will support our instructors. Not all of the details are worked out yet, so it’s difficult to cover it all. We’ll have emails going out to instructors explaining the changes later in December, as we get things nailed down. Instructors are absolutely essential to our future, and we want to do everything possible to promote safe, effective teaching of new pilots.
The Professional Airsports Association (PASA) is a nonprofit organization created as a trade association for the airsports industry to help businesses. Originally founded to offer information on the industries of Hang Gliding, Paragliding, Kitesurfing, Ultralight Flying and Parasailing with the intention of creating industry standards for operations, procedures and safety. Acceptance and adherence to these standards became the basis for certification. With industry standards and certifications in place, options for insurance became available.
PASA has set standards for parasailing, ultralight schools, hang gliding schools and kiteboarding schools in the past, but has been focusing on certifying kiteboarding instructors and schools for the past 15 years, so the previous criteria for hang gliding and paragliding schools is dated.
They are in the process of redefining the criteria necessary to become a certified hang gliding or paragliding school. Their intention is to have the criteria in place and to start certifying hang gliding and paragliding schools by the beginning of February. Their goal is to certify schools through an application process that will be done without site visits in order to keep costs down for the schools. There will be a fee for reviewing the certification application and an annual membership fee. The amounts have not yet been determined, but the need to keep costs as low as possible is understood.
PASA will certify only commercial schools, not individual instructors. Should an individual instructor wish to get PASA certified, they will need to be the owner/operator of a school and will need to accept and adhere to the standards and qualifications set by PASA and apply for certification as a commercial school.
Although not all the criteria have been finalized, some of the known criteria will include: lesson plans, safety procedures, site assessment and risk management plan, operation plan including site plan with flight traffic pattern, and verification of a USHPA certified instructor on staff with current 1st aid and CPR certification. These items should be organized in preparation for application.
Schools must purchase commercial liability insurance from the RRG. They can do this either independently as part-owners of the RRG, or through PASA, the Professional Air Sports Association. Rates will vary depending on the volume of annual training and the type of training being done.
Instructors teaching for compensation of any kind must be affiliated with a PASA-certified school to have insurance coverage. Compensation would include fees for training, “free” training included with equipment, “guiding” services, “donations” for training, “free tandem flights” offered as a fundraiser, and any other form of training where any exchange of value takes place. Instructors may join together to form a certified school in places where there is currently none.
Instructors who are teaching strictly without any form of compensation are covered by USHPA’s Professional Liability policy, with the same $500K/occurrence limit. If there is any form of compensation whatsoever, the insurance is void.
There are plenty of questions not yet covered, and they’ll be discussed in a future mailing to instructors.
Send your questions (not answered above) to firstname.lastname@example.org and we’ll add them to the FAQ.
We have seen several serious accidents and fatalities related to mini-wing flying, but so far they have not shown up as a significant factor in our insurance claims. All flying accidents have an effect because they raise concerns on the part of insurers about how we’re managing risk in our sport. By taking ownership of our insurance claims through the RRG, we’ll be in the best position to evaluate risk from different aspects of our sport and to control those risks.
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