128/01
22 November 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, until 23 January 2002. This will ensure that UK airlines can continue to fly in the wake of the events of September 11.
Chief Secretary Andrew Smith said:
?The Government has decided to renew the insurance scheme to enable airlines to keep flying. The Government's objective remains to withdraw from the market as soon as practicable. However, 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.?
The current scheme expires on 23 November. The scheme will be rolled forwards until midnight on 22 January 2002. As before airlines and service providers will be required to find commercial cover for the first $50m of third party war and terrorism liabilities. The Government backed Troika scheme will provide the cover for liabilities above those minimum levels.
Premiums will be payable by all airlines covered by the Troika scheme. These will continue to be on the per passenger basis recommended in European Commission guidelines. However, discussions will continue with the industry on whether this is the most appropriate basis.
The Government will also continue discussions with the industry with a view to more commercial cover being reintroduced into the market.
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. 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 (Treasury press notice 103/01). This scheme expired at midnight Tuesday 24 October. The scheme was renewed, with modifications, for a further 30 days and this expires on 23 November (press notice 117/01).
2. 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.
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. For airlines cover above the $50m commercial cover will be payable to Troika at rates in accordance with the European Commission guidelines. These propose a tiered system of charging for Government schemes: for cover between $50 million and $150 million a premium of not less than $0.35 per passenger, cover between $150million and $1billion a premium of not less than $0.35 per passenger, and cover above $1billion a premium of not less than $0.25 per passenger. The premiums are cumulative.
6. Extension of the scheme beyond the end of 2001 is subject to agreement by the European Commission.
7. The Government will continue discussions with the industry to ascertain whether this is the most appropriate basis for charging premiums. The revised agreement, therefore, contains a provision which would enable premiums to be charged, subject to the agreement of the European Commission, on a revised basis from the beginning of January 2002 until a more appropriate basis can be developed.
8. Cover for service providers is provided by Troika 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.
9. Media enquiries should be directed to Liane Farrer, HM Treasury Press Office, tel 020 7270 5192.