TOM GILL / LONDON
European airlines have unveiled plans to establish their own mutual war-risk insurance scheme - but have failed to win backing for an extension of government support beyond the end of this month. European finance ministers decided last week to leave that decision to the region's transport ministers, who meet later this month.
The delay could raise particular problems for UK airlines, where the government's Troika insurance scheme ends on 20 March.
The Association of European Airlines' plan was based on a new mutual insurance plan, which mirrors proposals put forward last month by European transport commissioner Loyola de Palacio. Under the scheme, commercial insurance would cover risks up to $150 million, a mutual airline fund would cover risks between $150 million and $1.5 billion, and governments would initially cover risk above that level. The airline fund would be financed from a 50¢ passenger levy, allowing government backing to be gradually withdrawn.
European airline sources suggest the captive war-risk insurance company, Equitime, which the US Air Transport Association is working to establish, could cover the global industry. Equitime would initially rely on $1.2 billion annually in excess insurance cover provided by the US Federal Aviation Administration at well below market rates. It would cost $366 million annually - less than half the $779 million premiums offered by the insurance industry and FAA, and a quarter of the $1.3 billion package presented by the insurance industry to replace present public-private arrangements, according to Salomon Smith Barney analysts Brian Harris and Daniel McKenzie.
Meanwhile, a larger global self-insurance scheme developed by the International Civil Aviation Organisation was approved by the body's council last week. The scheme would cover airports, ground handlers and lessors, as well as airlines. Capital for a non-profit entity providing war-risk insurance in excess of $50 million up to $1.5 billion would be built up using a 50¢ passenger levy. States acting as reinsurers of last resort would be repaid from the pool. However, the complexity of the scheme means a start-up date "will not be within the next few months", says ICAO.
Source: Flight International
