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Tuesday, 5 March, 2002, 08:06 GMT
EU airlines seek insurance extension
European airlines want to set up their own insurance fund
European airlines want their own insurance fund
Europe's major airlines are to ask European Union finance ministers in Brussels to extend emergency insurance guarantees provided after the 11 September attacks.

Insurers cancelled war and terrorism coverage in the wake of the plane hijackings. This forced the governments to intervene to keep the airlines flying.

However the cover runs out this month and the airlines say the surcharge now being demanded by insurers to cover terrorism liabilities - up to $3.10 (2.20) per passenger per flight - is far too high.

European airlines, already suffering from overcapacity, recession fears and high fuel prices, were hit hard by the knock-on effects of the attacks on the US, and are seeking to keep extra costs to a minimum.

Airline insurance premiums rocketed following September 11 attacks
Airline insurance premiums rocketed following September 11 attacks
On Tuesday they will call for a three-month extension to the EU guarantees to give them time to set up their own mutual fund to cover their future liabilities from terrorist attacks.

The idea is for regular commercial insurance to cover risks up to $150m (105m) and for the fund to cover risks between $150m and $1.5bn, with governments covering risks above that.

The fund would be financed by a ticket surcharge of $0.50 if all airlines join, according to a plan drawn up by the Association of European Airlines (AEA).

The International Civil Aviation Organisation (ICAO) are discussing a similar proposal to create a global mutual insurer in Montreal on Tuesday.

But it was doubts about the viability of a global scheme have prompted European airlines to develop their own alternative, similar to the model recently proposed by US airlines.

Roger Wiltshire, General Secretary of the British Air Transportation Association (Bata) said that European airlines were supportive of the ICAO proposal as it was a long-term solution.

But he added: "Although it would be good if all the airlines of the world got together, there are some political and legal obstacles to that happening in the short term."

Political opposition

Brian Moore, chairman of the aviation division of Marsh, said the mutual would be 25% to 30% cheaper than the private insurance options currently available.

"Our only concern is whether the governments will support it. We are getting mixed signals at the moment," he said.

The plan faces resistance from insurance companies and governments like the UK and Finland which are keen on a private market solution.

Britain expressed its reluctance at a recent meeting with insurance brokers and British airlines.

Martin Hedley, chairman of the aerospace division of Willis insurance brokers said: "They made it abundantly clear they didn't want to be involved."

Benjamin Weber, executive technical partner for aviation at Partner Re said: "Personally, I have my doubts about the viability of the idea of an airline mutual insurer.

"I think the combination of the private sector providing what capacity it feels it can with governments providing a top-up in the event of a big loss is the best solution."

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The BBC's Patrick Bartlett
"Airlines are asking EU Finance Ministers for a three month extension"
See also:

21 Sep 01 | Business
US offers airlines $15bn aid
22 Sep 01 | Business
Airline insurance deal 'not subsidy'
23 Sep 01 | Business
Airlines receive $15bn aid boost
21 Sep 01 | Business
Airlines threaten to stop flying
20 Sep 01 | Business
EU considers aid for airlines
19 Sep 01 | Business
US airlines lose 40,000 more jobs
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