Airline insurance measures will hit shippers and passengers in the pocket

IN A shock move which threatened to shut down airlines and airports, the aviation insurance industry last week slapped on a whole host of new insurance measures and ordered the international airline industry to fork out, or not fly.
According to an announcement by the Association of European Airlines, insurance premiums were raised eight-fold for passenger liability and by a factor of 15 for war risks.
There was no relief for the world's already financially-battered airlines.
"These figures are not negotiable," said the association, threatening that, if the additional premiums were not met, insurance cover for civil aviation worldwide would be withdrawn.
The insurance industry also decided that the maximum third-party liability limit for collateral damage on the ground involving aircraft would be decreased to US$50-million. This reduced limit - where previous cover levels exceeded the billion mark for larger air carriers - was considered by airlines to be far from adequate. Indeed, so low that many airlines would be unable to continue operations.
Carriers immediately rushed to hold talks with insurance companies to head off the threat to withdraw cover and avert a shut-down of flights and airports.
Airlines also issued ultimatums to governments to help meet the higher premiums or face paralysis of the commercial air industry.
But government aid - except in the case of the US - was relatively limited.
In the biggest, US President George Bush signed off a bill giving state-backed insurance cover against war and terrorism risk for the next six months.
While UK airlines and insurance groups struck a deal in London to avert a shut-down, European Union (EU) finance ministers agreed to provide similar war risk insurance for their airlines after commercial insurance underwriters cancelled existing cover - but initially, only for the next month.
They also issued a clearance for individual EU governments to offer their own national carriers state-aid - but this was expected to be very patchy.
Governments throughout Asia also came under pressure to bail out airlines reeling from a huge rise in insurance premiums and a slump in passenger traffic after the US terror attacks.