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Last Updated: Wednesday, 25 August, 2004, 19:58 GMT 20:58 UK
Airlines may lose terrorist cover
European governments may soon have to cover aviation insurance
European airlines could soon find they cannot secure insurance cover for certain terrorist risks, such as biological or nuclear attacks.

Lloyd's Market Association confirmed to BBC News Online that it and a number of other insurers have drafted a new clause that excludes some such factors.

Airlines may not fly without insurance and the move could mean governments having to offer the cover instead.

This is already the case in the US after the 11 September 2001 attacks.

The White House said it would provide cover for uninsurable aviation risks until 2008 to keep airline fleets in the air.

Electronic attack

"Work has been done by underwriters in London to establish a clause that excludes some terrorist risks," a spokesman for Lloyd's told BBC News Online.

"A clause has now been drafted and sent to all the relevant parties.

"Nothing has been published at the moment, but the intention is to do so."

The spokesman added: "However, the clause will not be binding, it will only be available for those who wish to use it."

German airline Lufthansa confirmed that if the private sector chose to remove cover for certain terrorist risks then "it will have to come down to a state guarantee".

Yet Lufthansa played down fears that it and other European airlines would be forced to ground their fleets, saying it was confident that a workable agreement could be found after talks with governments, insurers and the European Union.

Other risks that could be excluded from cover include attack by electromagnetic pulses that could damage an aircraft's instruments.

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