Aviation schemes get ready for take-off

The US mutual scheme Equitime could begin writing war and terrorism cover for US airlines by the midd...

The US mutual scheme Equitime could begin writing war and terrorism cover for US airlines by the middle of July, provided the US federal government agrees to act as reinsurer of last resort, according to one of the scheme's developers.

Equitime has been put together by the Air Transport Association, which represents US airlines, and Marsh Aviation in the US in response to the increased cost of aviation cover following the 11 September terrorist attacks.

Since 11 September US airlines have typically been able to get $50m of cover commercially, with the US federal government providing the third-party war and terrorism cover up to $1.5bn that airlines need to fly.

Equitime would provide $1.5-2bn of cover, with the first $300m retained by airlines. The target premium is $0.50-0.70 per passenger.

Also in June, European Union (EU) transport ministers asked the European Commission to produce a formal proposal for the similar Eurotime scheme for their meeting on 3-4 October. Under the proposed mutual, aviation companies would buy commercial cover for war and terrorism risks up to $150m, the fund would provide up to $1.5bn of further cover from a $0.70 per passenger levy and governments would cover risks above that.

Marsh in Europe has been involved in setting up Eurotime for the 26-member Association of European Airlines (AEA).

EU governments were also expected to extend again, beyond the end of June, state support for aviation insurance.

Also, the council of the International Civil Aviation Organisation (ICAO), which represents governments, in June agreed to set up a five-year terror insurance scheme for the whole of the world's civil aviation sector, provided states representing 51% of annual ICAO contributions agree by 19 July to act as guarantors of last resort.

The ICAO scheme would give up to $1.5bn of cover per insured per occurrence for claims above the $50m available in the market. If all 187 ICAO states took part, up to $15bn would be available.

On 7 June the US state of Vermont licensed Equitime's proposed operating company, Risk Retention Group (RRG). Scott Russell, managing director and head of the US aviation practice of Marsh Aviation, said in mid-June that Equitime's backers were "optimistic" of getting federal backing but it depended on federal backing for general terrorism cover. If the US government backs Equitime, cover could be available within a couple of weeks, said Mr Russell.

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