03/02
21 January 2002
GOVERNMENT RENEWS TERRORISM COVER FOR UK AVIATION INDUSTRY
The Treasury has extended the short-term replacement insurance scheme for the aviation industry until 20 March 2002. The 'Troika' scheme was set up to ensure that UK airlines could continue to fly in the wake of the terrorist attacks on 11 September, and was due to expire at midnight on 22 January.
The scheme will be extended for a final time, offering third party war and terrorism insurance for liabilities greater than US$50 million, in order to allow the market time to make alternative arrangements.
NOTES TO EDITORS:
1. On the 20 September 2001 the British Air Transport Association (BATA) confirmed that 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 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 expired at midnight Tuesday 24 October. The scheme was renewed, initially for a further 30 days (press notice 117/01), and then for a further 60 days (press notice 128/01). It is now due to expire at midnight 22 January.
2. The scheme has now been extended until midnight on 20 March. At this point Troika will be brought to an end. European guidelines have set a deadline for all government schemes to end by 31 March. The US scheme is due to end on 20 March.
3. The brokers, Aon, Marsh and Willis, 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.
4. The airlines scheme covers airlines with a Civil Aviation UK operating license or transport licence. Service providers to the airline industry and airports are covered for their operations in the UK. By agreement with the Isle of Man, IOM airlines and service providers are also included on a risk-sharing basis.
5. The scheme fills in the gap between the cover airlines and service providers had for third party terrorism liabilities before the US attacks, and what the insurance industry is prepared to provide now. Cover is limited at US$2 billion.
6. Following European guidelines, cover under Troika is provided at a commercial charge. Currently, for airlines, cover above the US$50 million commercial cover is 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 US$50 million and US$150 million a premium of not less than US$0.35 per passenger, for cover between US$150 million and US$1 billion a premium of not less than US$0.35 per passenger, and for cover above US$1 billion a premium of not less than US$0.25 per passenger. The premiums are cumulative. Premiums are subject to changes in European guidelines. Guidelines state that, from 1 February, the premium for cover between US$50 million and US$150 million should increase from $0.35 per passenger per flight to US$0.40.
7. Cover for service providers is provided by Troika at a commercially based premium following the example of the existing Pool Re scheme which provides insurance cover for terrorist attacks on buildings in Britain. The objective is that the insurance industry should provide insurance capacity at appropriate market rates as quickly as possible.
8. The Government will consider whether any residual insurance support might be justified after the present arrangements expire on 20 March.
9. Media enquiries should be directed to Simon Moyse, HM Treasury Press Office, tel 020 7270 4420.