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115/01

22 October 2001

GOVERNMENT RENEWS TERRORISM INSURANCE COVER FOR AVIATION INDUSTRY

The Treasury has today decided to renew the scheme, set up to fill the gap in the commercial insurance market, for a further 30 days. This will ensure that UK airlines can continue to fly in the wake of events in the United States last month.

Chief Secretary Andrew Smith said:

“The Government has decided to renew the insurance scheme to enable airlines to keep flying. There is still a gap in the commercial insurance market which the Government is filling to ensure the aviation industry has the cover it needs. 

“We have also decided to waive the premiums for airlines for a further 30 days, and are consulting the industry about the best basis for charging in the future.”

The scheme will be rolled forwards for a further thirty days, until midnight 24 November.  From 1 November airlines will be required to find commercial cover for the first $100m, and service providers for the first $50m, for third party war and terrorism liabilities. The Government scheme will provide the cover for liabilities above those minimum levels.  The Government will continue to waive the premium for the airlines.

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NOTES TO EDITORS

1.         On the 20 September 2001 the British Air Transport Association (BATA) confirmed airlines had received seven days notice of cancellation of their war liability insurance cover.

2.                Sir Andrew Turnbull, Permanent Secretary to the Treasury, hosted meetings on the afternoon of the 20 September with the insurance industry and airline representatives to urgently explore possible solutions, and a Government scheme was announced on 21 September  (PN 103/01).  This scheme expires at midnight Tuesday 24 October.

3.                The airlines scheme covers airlines with a Civil Aviation UK operating license or transport license. Service providers to the airline industry are covered for their ground operations in the UK.

By agreement with the Isle of Man, IOM airlines and service providers are also included on a risk-sharing basis.

4.                The scheme fills in the gap between the cover airlines and service providers had for third party war and terrorism liabilities before the US attacks and what the insurance industry is prepared to provide now. 

5.                From 1 November, service providers will need to purchase the first $50 of cover in the commercial market. Airlines will need to purchase the first $100m of cover from the commercial market. The 1 November date has been set to allow time for the market to ensure adequate cover is available. The Government will provide indemnity for liabilities above this base level.

6.                This charge for airlines was waived for a period of 30 days and this waiver will continue for the next 30 days, while the Government consults on the most appropriate method for charging premiums to the airlines. 

7.                Cover for service providers is provided at a commercial charge following the example of the existing Pool Re scheme which provides insurance cover for terrorist attacks on buildings in Great Britain. The objective is that the insurance industry should provide insurance capacity at appropriate market rates as quickly as possible.  Service providers will continue to be charged a premium for the Government scheme, but this will be adjusted to reflect the fact some cover is being bought in the commercial market.

8.                The brokers AON, Marsh and Willis have set up an insurance company – Troika - which provides insurance policies under the scheme to fill the gap in commercial cover. The policies are administered by Global Aerospace. 

9.        Media enquiries should be directed to HM Treasury Press Office, 020 7270 4420. 

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