Because all of aviation is treated as one pool by insurance underwriters, the use of airliners as terrorist weapons has had repercussions for all segments of the industry, including general aviation (GA).
US manufacturers saw their premiums increase and coverage reduce overnight after the 11 September attacks. Owners and operators of aircraft and providers of aviation services have also seen insurance costs increase.
The US General Aviation Manufacturers Association (GAMA) says premiums for manufacturers and operators of private aircraft have increased 50-100% since 11 September. In addition, continued coverage is subject to stricter underwriting standards, with insurers looking at loss histories and assigning risks. Avemco has refused to issue new policies on higher-performing kitplanes because of the perceived increased risk.
Higher premiums will result in higher aircraft prices, but there is some prospect of premiums reducing in the near future if other insurance providers enter the market. The number of major aviation insurers fell from seven to four after 11 September, but ACE USA and Berkshire Hathaway have signalled their intent to enter the market.
More worrying for manufacturers is the fact that underwriters are only renewing policies for a year at a time, and have threatened to terminate coverage if there is another aviation terrorist event. "We need to stabilise the industry so that underwriters will commit to longer-term coverage," says GAMA. To that end, the industry association is backing efforts by the Coalition to Insure Against Terrorism (CIAT) to create a short-term government backstop that insures against damage from terror attacks.
CIAT is a multi-industry pressure group that is pushing Congress to enact terrorism insurance legislation. The House of Representatives has passed a bill that would create a federal insurance programme to cover losses caused by terrorism, but similar legislation is held up in the Senate.
Source: Flight International
