In all sincerity I wouldn't have claimed for the ash cloud but put me down in a desert for 10 hours and blame it on an 'Act of God', is a horse of a different colour.
When a person insures some almost believe they have a right to receive back in claims each year at least what they have contributed. It is almost a feeling of entitlement to claim and to exaggerate such a claim.
With this new ruling we could create the danger where the travelling public will choose not to insure because they believe someone else will always pick up the bill if things go wrong.
Self-insurance may be one option for the airlines but some of the events the airlines will have to cover are not at all predictable and the aggregate effect of several losses, could have the same affect as a catastrophic loss particularly in the early years after formation of the fund. Imagine an airline that finds themselves under financial pressure, wouldn't they be tempted to borrow from the funds? On the other hand airlines that are doing well won't appreciate having to have capital tied up. Also I think the contributions made towards a fund for self insurance purposes may not qualify for corporation tax relief.
The purpose of insurance is to spread the risk and I think the travelling public have an obligation to insure themselves. There are new risks that have to be covered and insurers will develop new products to cover it.
In all fairness I can't see how you can't have a no limit duty of care that the airlines must now work to.