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Airlines Discuss Own Insurance

February 12, 2002

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NEW YORK (AP) _ With the market for war liability insurance all but dried up for airlines ever since Sept. 11, the nation’s major carriers are in discussions to create their own insurance company.

Working with an insurance unit of Marsh & McLennan Cos. Inc., the Air Transport Association, an industry group, has developed a proposal that would provide airlines with as much as $1.5 billion in third-party war liability coverage. The industry-run policy could go into effect as early as next month.

``It is up to each individual carrier to decide if they would want to participate,″ Jim Casey, an attorney for the Washington-based trade group, said Monday. Several major U.S. airlines are currently reviewing the proposal, Casey said.

The Federal Aviation Administration has been providing this type of coverage to the industry since Sept. 11, but the policy expires on March 20. The agency is considering a one-year extension of the policy.

Since Sept. 11, commercial insurers have only offered the airline industry about $50 million in coverage.

The industry proposal calls for the creation of a ``risk-retention group,″ which is essentially an insurance vehicle owned by the participants it would cover.

The risk-retention group under review, tentatively called Equitime, would cover airlines for damage caused on the ground domestically and internationally, Casey said.

It would be funded by participating airlines with help from a premium added to the price of an airline ticket. The fee would be at least $2.50 per roundtrip ticket.

The FAA would act as a reinsurer, Casey said.

The industry publication Business Insurance first reported on the proposal on Monday.

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