NU Online News Service, April 19, 4:09 p.m. EDT

Travel delays and cancellations stemming from the Icelandicvolcano are expected to cause significant losses for travelinsurers, but an exact estimate is not possible yet at this earlystage, a travel insurance association president said.

Jim Grace, president of the U.S. Travel Insurance Association(UStiA) said, "This is a major event, for sure," but he refused toendorse a report that industry losses could exceed $10 million, itis "really too early to tell," he explained.

The last major event, he said, was 9/11, but while that event,as it related to travel insurers, lasted two to three days, thetimeframe for the volcanic ash cloud is longer.

He said UStiA is talking to companies to get a sense of whatlosses might ultimately be.

Speaking to the market penetration of travel insurance, Mr.Grace said about 30 percent of travelers carry such coverage.

William Beardsley, senior vice president, Travel and AccidentDivision for Arch Insurance Group, said take up may be higher forAmericans traveling overseas.

For Europeans, he said, take up is much higher--at approximately95 percent.

One reason for the higher take up among Europeans, Mr. Beardsleynoted, is that they often do not have medical coverage when theytravel abroad. For Americans, he said, their health insurancegenerally follows them outside the U.S.

Speaking to what may be covered by travel insurance policies,I.I.I. spokesperson Loretta Worters on Friday outlined for NUOnline a few instances where travel insurance might cover travelersfor the volcano eruption and the delays caused by the resulting ashcloud. (http://www.property-casualty.com/News/2010/4/Pages/Business-Interruption-Aviation-Volcano-Claims-Success-Unlikely-.aspx).

Ms. Worters said, "Travel insurance policies will differ in thissituation; there is no standard set of conditions which applies toa situation of this kind. Therefore customers should check theirtravel insurance policy, and speak to their travel insurer tounderstand what their individual policy covers them for in thissituation."

Mr. Beardsley mentioned a segment that appeared yesterday on anational network where it was erroneously reported that there is nocoverage for flights delayed or cancelled because of the volcaniceruption, and that travel policies do not cover acts of God.

Mr. Beardsley said that may be true for "loss of income"insurance for airlines.

Catastrophe modeler AIR Worldwide said yesterday that airlinesgenerally do not have insurance coverage to compensate for thistype of disruption, which fall under "act of God" exclusionclauses.

But Mr. Beardsley said this is not the case for travel insurancepurchased by travelers.

He said coverage for Europeans may be different, but forAmericans, trip cancellation and trip interruption coverages couldbe triggered by the ash cloud.

For cancellation coverage, Mr. Beardsley said any non-refundabledeposits for airfare, hotel, etc. could be covered. Cancellation,he said, is a pre-departure coverage.

For trip interruption, Mr. Beardsley said travel insurance willpay for such things as extra meals and hotel accommodations whilethe traveler is waiting to come back to the U.S.

John W. Cook, president of QuoteWright.com--a website thatallows consumers to compare travel insurance plans--said the ashcloud could be classified by insurers as either a "naturaldisaster" or an "adverse weather" event, and how it is classifiedcould affect trip cancellation and interruption coverages.

"Under those coverages, some, but not all, companies include'natural disasters' which cause your airline to cease operations tobe a covered event," said Mr. Cook. But coverage may be limited, hesaid, if the event is interpreted as a natural disaster.

Adverse weather, he said, is a more common covered event when itcauses an airline to cease operations for a specific timeperiod--usually 24 hours.

"Coverage for travel delay and missed connection [two additionalforms of travel insurance] is clearer," said Mr. Cook. "Thesecoverages are also 'named peril' benefits, however the majority ofplans include 'natural disaster' as a covered event."

Mr. Beardsley said the natural disaster trigger for cancellationcoverage would kick in if accommodations at the travel destinationare uninhabitable, which did not happen in this case.

But he said most policies in the U.S. are written in a way thatwould define the ash cloud--not the volcanic eruption itself--asadverse weather.

According to AIR, property and agricultural damage, tourismimpact, and imports and exports are not expected to causeconcern.

AIR said, "In addition to the costs to the airline industry, themajor source of loss may be to economic output from people unableto return to work, estimated at around $500 million a day by aneconomist from the Royal Bank of Scotland. Unless the restrictionsremain in place for a long time, however, the impact on economicgrowth is expected to be minimal."