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Aviation Daily
DOT, FAA Set One-Year War Insurance Extension
By Angela Kim
07/19/2004 10
21 AM
The U.S. Transportation Dept. will continue the federal aviation war-risk program, due to expire next month, for another year, granting the airlines' request for an extension but making clear that the government plans to return insurance coverage to the private sector.
In an interview on Aviation News Today, the American Association of Airport Executives' cable television program, DOT Assistant Secretary Karan Bhatia emphasized that the federal program is a temporary "backstop" to private insurance and "not intended to be the primary supplier of war-risk insurance on a permanent basis."
While DOT supports the one-year extension to serve as a transition period back to private insurance and to help the changeover process, DOT's goal is "to return to terms and conditions similar to those that were in effect between September 2001 and December 2002," Bhatia said.
DOT believes the commercial insurance market is "now capable of meeting at least some of the war risk insurance needs of the industry," Bhatia said, but "more time is needed before the commercial market could meet all of these needs." In addition to the extension, Bhatia said DOT favors continuing the ban on punitive damages against air carriers and the $100 million aggregate cap on carriers' liability for third-party losses caused by terrorism.
An industry source told The DAILY that airlines are "pleased to get the one-year extension" but disagreed with Bhatia about the state of the private insurance market.
"U.S. airlines sought the extension because there is no viable private insurance market [for war risk] today without significant added cost or exclusions" for the most hazardous situations involving biological or nuclear attacks, the source said.
He estimated that private war-risk insurance, even without coverage for the worst-case scenarios, could cost as much as $750 million for the industry. Private insurance options are not expected to return in the short term of two or three years, the source said.
The House Appropriations Transportation and Treasury subcommittee reported out a Fiscal Year 2005 spending bill last week that includes an extension of government-backed war-risk insurance with premium price caps for one year (DAILY, July 16).
DOT, FAA Set One-Year War Insurance Extension
By Angela Kim
07/19/2004 10
21 AMThe U.S. Transportation Dept. will continue the federal aviation war-risk program, due to expire next month, for another year, granting the airlines' request for an extension but making clear that the government plans to return insurance coverage to the private sector.
In an interview on Aviation News Today, the American Association of Airport Executives' cable television program, DOT Assistant Secretary Karan Bhatia emphasized that the federal program is a temporary "backstop" to private insurance and "not intended to be the primary supplier of war-risk insurance on a permanent basis."
While DOT supports the one-year extension to serve as a transition period back to private insurance and to help the changeover process, DOT's goal is "to return to terms and conditions similar to those that were in effect between September 2001 and December 2002," Bhatia said.
DOT believes the commercial insurance market is "now capable of meeting at least some of the war risk insurance needs of the industry," Bhatia said, but "more time is needed before the commercial market could meet all of these needs." In addition to the extension, Bhatia said DOT favors continuing the ban on punitive damages against air carriers and the $100 million aggregate cap on carriers' liability for third-party losses caused by terrorism.
An industry source told The DAILY that airlines are "pleased to get the one-year extension" but disagreed with Bhatia about the state of the private insurance market.
"U.S. airlines sought the extension because there is no viable private insurance market [for war risk] today without significant added cost or exclusions" for the most hazardous situations involving biological or nuclear attacks, the source said.
He estimated that private war-risk insurance, even without coverage for the worst-case scenarios, could cost as much as $750 million for the industry. Private insurance options are not expected to return in the short term of two or three years, the source said.
The House Appropriations Transportation and Treasury subcommittee reported out a Fiscal Year 2005 spending bill last week that includes an extension of government-backed war-risk insurance with premium price caps for one year (DAILY, July 16).
