US airlines consider insuring themselves

In response to the lack of available war risk coverage following the September 11 terrorist attacks, airlines south of the border are considering their own insurance scheme. This comes as government-backed coverage is set to run out on March 20.The coverage, for third-party war risk liability, was pulled by insurers after two planes were hijacked and flown into the World Trade Center towers, another into the Pentagon and a fourth crashing into a field in Pennsylvania. Insurers immediately cancelled coverage and the government was forced to step in lest the airline industry be grounded. Currently insurers will cover up to US$50 million of the exposure, with the government taking on the excess.The same situation has taken place in Canada, with the government recently extending its coverage, but many wondering what will be done in terms of a long-term solution.In the absence of insurers stepping into the market to offer coverage, U.S. airlines are considering establishing their own insurance vehicle, which they would each share ownership in. Provisionally called “Equitime”, the scheme would offer the same level of coverage airlines could get prior to September 11, US$1.5 billion. According to U.S. publication Business Insurance, the airlines have approached Marsh, the world’s largest broker, about setting up the scheme, which could involve establishing a captive in Vermont.