European airlines reject insurers as government covers set to expire

European airliners represented by the Association of European Airlines (AEA) have rejected an insurance industry proposal for third-party war and terrorism coverage on grounds that the latest offering remains too costly.The AEA estimates that the latest insurance proposal would cost its members an additional Euro 600 million a year in coverage costs. The AEA rejection comes on the eve of when temporary government "financial guarantee" covers for losses against buildings and people on the ground come to a close. In the aftermath of the September 11 terrorist attacks in the U.S., insurers withdrew coverage globally for third-party war and terrorism cover, resulting in many government’s stepping forward to provide interim guarantees against ground losses to enable their national airliners to continue flying. Many of the European governments in question have indicated that they will not be extending these guarantees beyond the end of March this year.The AEA says that it had been hoped that insurers would have returned to the aviation market with a range of competitive offerings by this point. "Instead, the airlines have been presented with a single take-it-or-leave-it proposal."As a result, AEA has presented its own "insurance plan" involving the creation of a fund financed by the airlines through a per-passenger levy. This plan requires ongoing governmental support for "excess risks", which the AEA has presented to several European government ministries. No response has been made yet by the governments in question. The AEA notes, "this [the AEA’s plan] would involve the building up of a fund, through a per-passenger levy substantially smaller than that contained in the insurers’ plan. Governments would continue to underwrite excess risks, but their involvement would diminish as the fund grew, and in relatively short time disappear entirely."