Insurers Not Pulling Airline Cover

By Mark E. Ruquet

NU Online News Service, March 20, 11:35 a.m.EST?Insurance brokers said, despite the war in Iraq,insurers are not seeking to pull coverage for aircraft and theflight industry has no immediate concerns that carriers will takesuch action.

"We have not heard nor do we expect to hear that the insuranceindustry is canceling coverage," said Wanda Warner, spokespersonfor the International Air Transport Association from her office inWashington, D.C. late yesterday.

Insurance brokers specializing in the aviation industry say thatthe carriers they have spoken to are not planning to cancelaviation coverage.

"There has been nothing from the carriers, so far," said RickWeinkauf, vice president and director of aviation for DaytonaBeach, Fla.-based insurance broker Brown & Brown. "No one isinvoking a notice to cancel coverage."

"Carriers are taking a wait and see attitude," said DeanAnderson, director of aviation for Chicago-based insurance brokerAcordia, a subsidiary of Wells Fargo Company. "They are not jumpingto conclusions."

John McCaffrey, corporate vice president and head of theaviation niche for insurance broker Arthur J. Gallagher,headquartered in Itasca, Ill., said since the terror attack of9/11, both customers and carriers have carefully reviewed theirpolicies to make sure their risks are positioned in a way bothparties are comfortable with.

"There is no scramble here," he noted. "No one is saying, ?Iwish I thought of that.' There is no knee jerk reaction to this[war crisis]."

The brokers said that those with aviation interests, smallcommercial airlines, and corporate and private aircraft havepurchased war risk for their craft. Insurers can cancel thecoverage with notice.

The length of notice time can vary depending on the policyagreement and range from 48 hours to 30 days. Generally, the noticetime is 7 days. And criteria for that notice spells out clearlythat it needs to be a declared conflict between sovereignnations.

Immediate termination is available under with the detonation ofnuclear device, they said.

If notice is given, insurance purchases would then be subject tomarket conditions and would probably be available at a substantialpercentage of the worth of the hull and liability coverage beingpurchased. One broker said that premiums usually run about 15percent of the worth of the hull and 20 percent of the liabilitybeing purchased.

When asked about the immediate cancellation of aviationinsurance for five helicopters used by the United Nations Monitor,Verification and Inspections Commission in Iraq earlier this week,the brokers speculated that the contractors must have used contractlanguage to cancel the policy not used in the standard forms.

For the United States' commercial air carriers there is notconcern for coverage cancellation, said Joyce Howard, managingdirector of aviation practice for Chicago-based Aon Corp. Thebroker represents seven of the nation's 10 largest air carriers,she said.

These carriers come under the insurance coverage of the HomelandSecurity Act, which provides coverage for the country's carrierswho have entered the program or are a part of the Civil ReserveAircraft Fleet. Under CRAFT, the commercial carriers provide planesto the government for transport.

Coverage, she said, is comparable to traditional carrier'scoverage, and slightly less expensive.

At a disadvantage, she noted, are foreign carriers who aredependent on the traditional market, largely written by Lloyd's ofLondon Syndicates. Here, they are subject to war risk buy back,cancellations and denial of coverage on 24 hour notice for airroutes deemed to be too dangerous.