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German Govt. extends aviation terrorism loss guarantee


March 20, 2002   by Canadian Underwriter


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The German government announced today that it plans on extending existing guarantees against terrorism and war losses for its airlines by another 60 days. European government guarantees against such losses expire at the end of March this year.
Governmental involvement in airline terrorism risk coverages resulted after the September 11 attacks in the U.S., which lead to most private sector insurance companies withdrawing cover on a global level for airline terrorism exposures. Subsequently, the airlines, through their various representative bodies worldwide, have been engaged in intense negotiations with insurers over the terms and pricing of renewed terrorism cover.
The majority of European airlines recently rejected an insurance industry offer, due to the high cost impact the renewed cover would have on the European airline industry’s operating margins. The airlines in question called upon their European governments to extend their March deadline for ending the guarantees in place, thereby allowing the airliners to create their own "insurance pool" against terrorism losses.
The German decision to extend its guarantee to the end of May is subject to approval by the European Commission. The latter has agreed to approve the extension if other union member countries agree to do so as well. Brussels says it is afraid that a piecemeal application of extensions will result in distorted competition within the airline industry.


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