Airlines to be Grounded Over Changes in Insurance Rules?
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Notso im with you.I spent a considerable time (10+) years in Guvs part of africa and i'd never heard of him. I did know, or know of, any one worth knowing about and as he used to keep name dropping some very close colleagus of mine i find it a little odd.
Still i suppose he could have been involved in mountain airlines or some such company over there, if so i have a few people who could do with being paid.
still i keep an open mind and wait and see.
i will have a snif around next month in nairobi tho. keep up the good work.
Still i suppose he could have been involved in mountain airlines or some such company over there, if so i have a few people who could do with being paid.
still i keep an open mind and wait and see.
i will have a snif around next month in nairobi tho. keep up the good work.
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The limitations on 3rd-party liability coverage may be a real concern, but the rest seems way overblown.
The $1.25 per passenger surcharge is a no-brainer -- the airline simply increases ticket prices by $2.00 each! Anyone who thinks the public will refuse to fly solely because of a $10 ticket price increase to cover the increased security costs is, IMO, unable to see the forest for the trees.
War-risk insurance is also simply a matter of passing along the increases to the customers. We have had airport tax surcharges and fuel surcharges and electricity surcharges ad nauseum in the past (and currently), and the public still continues to fly and ship their goods. Since the seagoing shippers also appear to be subject to an insurance cost increase, the probability of a customer choosing to change the mode of shipping solely because of an insurance surcharge is relatively low.
The $1.25 per passenger surcharge is a no-brainer -- the airline simply increases ticket prices by $2.00 each! Anyone who thinks the public will refuse to fly solely because of a $10 ticket price increase to cover the increased security costs is, IMO, unable to see the forest for the trees.
War-risk insurance is also simply a matter of passing along the increases to the customers. We have had airport tax surcharges and fuel surcharges and electricity surcharges ad nauseum in the past (and currently), and the public still continues to fly and ship their goods. Since the seagoing shippers also appear to be subject to an insurance cost increase, the probability of a customer choosing to change the mode of shipping solely because of an insurance surcharge is relatively low.
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Isn't it time someone pointed out to these insurance companies that they are in the risk business?. They are more than happy to take the premiums in the good times then as soon as they are faced with a claim they duck,dive and weave and out comes the book of loopholes and excuses. 
The news this evening contained a hint that the UK govt may meet the extra cost of insurance for carriers.When all this is over an investigation into the sharp practices of the insurance industry would be a good idea.
The news this evening contained a hint that the UK govt may meet the extra cost of insurance for carriers.When all this is over an investigation into the sharp practices of the insurance industry would be a good idea.
Mistrust in Management
Not so Fantastic my friend,
I applaud your efforts to rid these boards of this irritating person, but it seems he will not go. He will inevitably overstep the mark with some of his views and perhaps then the moderators will strike.
Perhaps it is best in the meantime to ignore the C.E.O of the worlds most profitable airline. He is not worth your efforts.
Come on mate, we have got better things to do!
Regards
Exeng
I applaud your efforts to rid these boards of this irritating person, but it seems he will not go. He will inevitably overstep the mark with some of his views and perhaps then the moderators will strike.
Perhaps it is best in the meantime to ignore the C.E.O of the worlds most profitable airline. He is not worth your efforts.
Come on mate, we have got better things to do!
Regards
Exeng
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Blah, Blah, Blah
The insurance issue IS an issue, for what it's worth I happen to think it is a red herring (dead herring?) floated by the insurance companies to blackmail the government for money - i.e. OUR money.
The Guvnor has a point, if you choose not to agree with it, do so with a little wit and logic. Personally, I don't give a rat's AR*E what he did or didn't do in Africa - is that relevant to this issue? No, I don't think so. What is relevant is that we might not be flying aeroplanes in a weeks time.
Boomshanka
The insurance issue IS an issue, for what it's worth I happen to think it is a red herring (dead herring?) floated by the insurance companies to blackmail the government for money - i.e. OUR money.
The Guvnor has a point, if you choose not to agree with it, do so with a little wit and logic. Personally, I don't give a rat's AR*E what he did or didn't do in Africa - is that relevant to this issue? No, I don't think so. What is relevant is that we might not be flying aeroplanes in a weeks time.
Boomshanka
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notso
So far Guvnors posts in the last few weeks have been spot on. I do not like what they say (because I'm a "greedy pilot" and he's a "cheapo beancounter" - with scottish blood), but I have to admit the are quite accurate.
The outfit I work for has had 61 years of operation without a passenger fatality, and I find it is OUTRAGEOUS that we have just been hit with a 500% increase in premiums, and now this.
The most galling irony is that half a dozen amateur pilots have brought the world travel industry to it's present state of disarray.
What I already know, is who is going to be asked to help pay for the recovery.Right Guv?
So far Guvnors posts in the last few weeks have been spot on. I do not like what they say (because I'm a "greedy pilot" and he's a "cheapo beancounter" - with scottish blood), but I have to admit the are quite accurate.
The outfit I work for has had 61 years of operation without a passenger fatality, and I find it is OUTRAGEOUS that we have just been hit with a 500% increase in premiums, and now this.
The most galling irony is that half a dozen amateur pilots have brought the world travel industry to it's present state of disarray.
What I already know, is who is going to be asked to help pay for the recovery.Right Guv?
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Let's be rational here folks,
Insurance is on the way up, but its not like we won't be flying airplanes next week. Someone will pay the prices, most likely the government, since they would be one of the biggest losers if we weren't flying.
The issue isn't that big of a deal and it involves more than the airline industry. On this side of the atlantic we've been warned that all of our insurance premiums (auto, home, etc) will be affected by this incident.
Life goes on, if not then terrorism wins.
Insurance is on the way up, but its not like we won't be flying airplanes next week. Someone will pay the prices, most likely the government, since they would be one of the biggest losers if we weren't flying.
The issue isn't that big of a deal and it involves more than the airline industry. On this side of the atlantic we've been warned that all of our insurance premiums (auto, home, etc) will be affected by this incident.
Life goes on, if not then terrorism wins.
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From the Financial Times:
Airlines face more chaos as insurance risks rocket
By Our International Staff
Published: September 20 2001 21:33 | Last Updated: September 21 2001 03:57
The airline industry warned on Thursday of severe disruption to services from early next week as a result of changes to insurance cover in the wake of last week's terrorist attacks in the US.
Airlines around the world said underwriters had given notice they would cancel cover for war liabilities from midnight on Monday. It means airlines and insurance companies will have to renegotiate the terms of cover in the light of the possibility of US military action in response to the terrorist attacks.
Ray Neidl, an analyst with ING Barings, said new premiums being discussed were "ridiculously high" and potentially sufficient to tip several weakened carriers over the brink. Airlines were lobbying Congress to exempt them from liability for damage on the ground, he added.
"There is zero posturing in this," said Peter Walsh, an airline consultant with Mercer Management Consulting. "Every airline around the world has been notified that coverage will be reinstated [only] for a [higher] fee."
The insurance problems are the latest blow to an industry already pushed to the wall by cancelled business, lack of demand and a complete loss of revenues from the US ban on flights last week.
"This is having a very wide-ranging impact," said Graham Nichols, chairman of the Aviation Insurance Office's Association, which represents aviation insurers trading in the London insurance market.
"At least in the Gulf war only certain airlines were affected, whereas now the potential risk of terrorism affects every airline."
Leading British airlines warned they could be forced to ground their aircraft unless the government offered help with covering insurance risks. To keep flights going, ministers are examining emergency measures, including a scheme that would see the government underwriting commercial airlines' insurance.
In a letter to Stephen Byers, the transport secretary, the airlines warn that reductions in insurance cover for injuries to third parties, such as people on the ground, could cause airlines to breach contracts with the companies from which they lease aircraft.
The letter, seen by the Financial Times, says insurers are offering third-party insurance of only $50m (E54m) - way below the $750m typically demanded by aircraft lessors.
"We are not confident aircraft owners and lessors will allow airlines to fly them with such reduction of cover," the letter says. "If our pessimism were to be borne out in practice, airlines would cease to be able to mount any form of coherent service beyond Monday 24th September."
Andrew Smith, chief secretary to the Treasury, and Sir Andrew Turnbull, permanent secretary, spent Thursday afternoon working with industry executives to devise a plan that would see cover restored.
One model being studied is Pool Re, the mutual insurer owned by the insurance industry but backed by the government, which has guaranteed commercial buildings against terrorist attacks since the IRA attacks on the City in the early 1990s.
Representatives from Europe's leading airlines met Loyola de Palacio, EU transport commissioner, in Brussels on Thursday to plead for special help. Ms de Palacio said she would raise the issue with EU finance ministers, who meet in the Belgian city of Liege on Friday and on Saturday.
Airlines in south-east Asia and Australasia announced they would be introducing surcharges of $1.25 per passenger to cover the shortfall in third-party insurance cover.
Airlines face more chaos as insurance risks rocket
By Our International Staff
Published: September 20 2001 21:33 | Last Updated: September 21 2001 03:57
The airline industry warned on Thursday of severe disruption to services from early next week as a result of changes to insurance cover in the wake of last week's terrorist attacks in the US.
Airlines around the world said underwriters had given notice they would cancel cover for war liabilities from midnight on Monday. It means airlines and insurance companies will have to renegotiate the terms of cover in the light of the possibility of US military action in response to the terrorist attacks.
Ray Neidl, an analyst with ING Barings, said new premiums being discussed were "ridiculously high" and potentially sufficient to tip several weakened carriers over the brink. Airlines were lobbying Congress to exempt them from liability for damage on the ground, he added.
"There is zero posturing in this," said Peter Walsh, an airline consultant with Mercer Management Consulting. "Every airline around the world has been notified that coverage will be reinstated [only] for a [higher] fee."
The insurance problems are the latest blow to an industry already pushed to the wall by cancelled business, lack of demand and a complete loss of revenues from the US ban on flights last week.
"This is having a very wide-ranging impact," said Graham Nichols, chairman of the Aviation Insurance Office's Association, which represents aviation insurers trading in the London insurance market.
"At least in the Gulf war only certain airlines were affected, whereas now the potential risk of terrorism affects every airline."
Leading British airlines warned they could be forced to ground their aircraft unless the government offered help with covering insurance risks. To keep flights going, ministers are examining emergency measures, including a scheme that would see the government underwriting commercial airlines' insurance.
In a letter to Stephen Byers, the transport secretary, the airlines warn that reductions in insurance cover for injuries to third parties, such as people on the ground, could cause airlines to breach contracts with the companies from which they lease aircraft.
The letter, seen by the Financial Times, says insurers are offering third-party insurance of only $50m (E54m) - way below the $750m typically demanded by aircraft lessors.
"We are not confident aircraft owners and lessors will allow airlines to fly them with such reduction of cover," the letter says. "If our pessimism were to be borne out in practice, airlines would cease to be able to mount any form of coherent service beyond Monday 24th September."
Andrew Smith, chief secretary to the Treasury, and Sir Andrew Turnbull, permanent secretary, spent Thursday afternoon working with industry executives to devise a plan that would see cover restored.
One model being studied is Pool Re, the mutual insurer owned by the insurance industry but backed by the government, which has guaranteed commercial buildings against terrorist attacks since the IRA attacks on the City in the early 1990s.
Representatives from Europe's leading airlines met Loyola de Palacio, EU transport commissioner, in Brussels on Thursday to plead for special help. Ms de Palacio said she would raise the issue with EU finance ministers, who meet in the Belgian city of Liege on Friday and on Saturday.
Airlines in south-east Asia and Australasia announced they would be introducing surcharges of $1.25 per passenger to cover the shortfall in third-party insurance cover.
Top Dog
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And I'm secrectly "The Guv". Really. Believe me.
I reckon Notso is the latest re-incarnation of Who?/Freeboot etc ad nauseum.
Edit: Just picked this up from today's Telegraph.
Insurance threat to airlines as BA cuts back 7,000 jobs
By Paul Marston, Transport Correspondent
(Filed: 21/09/2001)
AIRLINES have been threatened with the indefinite grounding of their fleets from next Tuesday because insurers are unwilling to continue providing war cover following last week's terrorist attacks on the United States.
With military action by America and its allies expected imminently, companies around the world are pressing governments to pay special surcharges of up to 400 per cent to allow them to continue flying.
Similar arrangements were made during the Gulf War in 1991, but insurers regard the risk to planes as more serious this time and have warned carriers that existing war cover will cease at midnight on Monday if the increased premiums are not met.
An emergency meeting between officials of the Treasury, the Department of Transport and the Lord Chancellor's Department yesterday examined an alternative option for the Government to underwrite war risk itself.
Stephen Byers, the Transport Secretary, said the Government was considering "targeted support" for airlines specifically to help them with the extra insurance and security costs that had arisen since last week's atrocities.
This assistance would have to extend to all airlines, including budget and charter carriers, not just transatlantic operators which are viewed as the highest risk group.
Airline executives said the issue would be discussed further at a meeting with Transport Department officials today, but they were optimistic that a deal would be struck.
The developments deepened the sense of foreboding in the aviation industry as British Airways announced plans to shed 7,000 jobs, an eighth of its workforce, in its efforts to survive the slump in transatlantic traffic.
The company, which is normally dependent on routes to North America for its overall profit, is also alarmed about possible fuel price rises following the US atrocities.
The aviation crisis claimed its first corporate victim yesterday when Newcastle-based Gill Airways ceased operations after the Bank of Scotland said it could no longer support the airline. About 250 jobs will be lost.
Virgin Atlantic has already declared its intention to lay off 1,200 people and Britain's third scheduled transatlantic operator, BMI British Midland, is expected to unveil a rationalisation programme next month.
A third of the BA staff cuts, which include 1,800 announced two weeks ago, involve cabin crew. The airline also wants to reduce pilot numbers by 400, engineers by 450, ground staff by 850, and marketing and administration personnel by 3,000.
Ten Boeing 747s will be grounded from the long-haul fleet, plus six 767s and four narrow-bodied aircraft used for European and domestic services. BA will cut its route network by 10 per cent, though details of the destinations axed and the frequencies reduced have not been finalised.
The company said it hoped to achieve the head count reduction in a variety of ways.
This included finding volunteers for unpaid leave, converting some full-time posts to part-time, cutting overtime and terminating arrangements with agency and short-term contract employees.
The price of BA shares fell by 13 per cent yesterday and City analysts predict that the company would face record losses this year and may not return to profit before 2003.
[ 21 September 2001: Message edited by: CargoRat2 ]
I reckon Notso is the latest re-incarnation of Who?/Freeboot etc ad nauseum.
Edit: Just picked this up from today's Telegraph.
Insurance threat to airlines as BA cuts back 7,000 jobs
By Paul Marston, Transport Correspondent
(Filed: 21/09/2001)
AIRLINES have been threatened with the indefinite grounding of their fleets from next Tuesday because insurers are unwilling to continue providing war cover following last week's terrorist attacks on the United States.
With military action by America and its allies expected imminently, companies around the world are pressing governments to pay special surcharges of up to 400 per cent to allow them to continue flying.
Similar arrangements were made during the Gulf War in 1991, but insurers regard the risk to planes as more serious this time and have warned carriers that existing war cover will cease at midnight on Monday if the increased premiums are not met.
An emergency meeting between officials of the Treasury, the Department of Transport and the Lord Chancellor's Department yesterday examined an alternative option for the Government to underwrite war risk itself.
Stephen Byers, the Transport Secretary, said the Government was considering "targeted support" for airlines specifically to help them with the extra insurance and security costs that had arisen since last week's atrocities.
This assistance would have to extend to all airlines, including budget and charter carriers, not just transatlantic operators which are viewed as the highest risk group.
Airline executives said the issue would be discussed further at a meeting with Transport Department officials today, but they were optimistic that a deal would be struck.
The developments deepened the sense of foreboding in the aviation industry as British Airways announced plans to shed 7,000 jobs, an eighth of its workforce, in its efforts to survive the slump in transatlantic traffic.
The company, which is normally dependent on routes to North America for its overall profit, is also alarmed about possible fuel price rises following the US atrocities.
The aviation crisis claimed its first corporate victim yesterday when Newcastle-based Gill Airways ceased operations after the Bank of Scotland said it could no longer support the airline. About 250 jobs will be lost.
Virgin Atlantic has already declared its intention to lay off 1,200 people and Britain's third scheduled transatlantic operator, BMI British Midland, is expected to unveil a rationalisation programme next month.
A third of the BA staff cuts, which include 1,800 announced two weeks ago, involve cabin crew. The airline also wants to reduce pilot numbers by 400, engineers by 450, ground staff by 850, and marketing and administration personnel by 3,000.
Ten Boeing 747s will be grounded from the long-haul fleet, plus six 767s and four narrow-bodied aircraft used for European and domestic services. BA will cut its route network by 10 per cent, though details of the destinations axed and the frequencies reduced have not been finalised.
The company said it hoped to achieve the head count reduction in a variety of ways.
This included finding volunteers for unpaid leave, converting some full-time posts to part-time, cutting overtime and terminating arrangements with agency and short-term contract employees.
The price of BA shares fell by 13 per cent yesterday and City analysts predict that the company would face record losses this year and may not return to profit before 2003.
[ 21 September 2001: Message edited by: CargoRat2 ]
Could someone explain, please? If the insurers refuse to insure and require airlines who don't like it to go elsewhere, then the airlines won't be paying them premiums, right? So how long will the insurers be in business then?
Or have they got so much income from elsewhere they can afford to shut down a major part of their business?
Where's my reasoning gone wrong?
Or have they got so much income from elsewhere they can afford to shut down a major part of their business?
Where's my reasoning gone wrong?
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This is from the BBC
Friday, 21 September, 2001, 07:06 GMT 08:06 UK
Airlines 'threaten to stop flying'
EU finance ministers will discuss subsidies for airlines
Leading UK airlines have reportedly warned Trade Secretary Stephen Byers they might be forced to ground their planes from Tuesday unless the government insures them for terrorist acts.
Airlines around the world said on Thursday that underwriters had given notice they would cancel cover for war liabilities from midnight Monday, the Financial Times newspaper said.
Ten airlines including British Airways, Virgin Atlantic warned in a letter to Mr Byers that reductions in insurance cover for third party injury could put them in breach of contracts with the companies from which they lease aircraft and stop them flying, it said.
The government is to hold crisis talks with airline and insurance company bosses on Friday.
It is also examining emergency measures, including a scheme that would see the government underwriting commercial airlines' insurance, to keep the airlines flying.
The news comes as the US Congress and the White House agreed a $15bn plan to bail out the airline industry in the aftermath of last week's terrorist attacks.
Emergency measures
The letter says insurers are offering third party insurance of just £34m, much less than the £515m typically demanded by aircraft leasing companies.
A spokeswoman for British Airways told BBC News Online: "We are talking to the insurance companies about the situation. We are aware of their concerns."
She refused to comment on the FT report that the airlines had threatened to stop flying.
Meanwhile, European Union finance ministers will hold an informal meeting on Friday to discuss the economic impact of the attacks on the US and the possible easing of rules on state subsidies for airlines.
In the US, President Bush has asked Congress to amend legislation on war risk insurance provided by the Department of Transport to cover domestic US flights, eliminating the risk of carriers being unable to find insurance and offsetting rate increases, his spokesman Ari Fleischer said on Thursday.
Security improvements
Insurance experts say that in some instances premiums have increased tenfold since last week's attack.
David Worsfold, editor of insurance industry journal Post, said cover for planes was still available but airlines were having difficulty securing liability insurance, to cover the risk of terrorist attack or war.
He said airlines could normally expect up to £1.5bn of liability, but this had now been reduced to £50m at best, which was not enough.
But, he added, insurance companies wanted to see a dramatic improvement in airline security before premiums would come down.
"Their (the airlines) attempts to improve security at airports could be described as inconsistent and haphazard at best," he told BBC Breakfast.
"You cannot expect insurance companies to be sympathetic to the airlines, if they cannot get that right," he added.
Overstating the case
Some industry figures believe the airlines are overstating the case for state aid.
Michael O'Leary, chief executive of low cost airline Ryanair told BBC Radio 4's Today programme: "There were going to be large job losses on the way already.
"Companies were losing money before last week.
"Last week's events have brought it forward."
Mr O'Leary said that rather than "begging" money from European governments, airlines should slash fares.
"We continue to take the same number of bookings per week as we did before the tragic events in the US last week," he added.
US rescue package
The US government's airline rescue package includes $5bn in direct grants to the airlines.
The US government will also provide the airlines with loan guarantees of $10bn.
US Transport Minister Norman Mineta said there was also an agreement that the federal government would spend $3bn to upgrade security in airplanes and airports.
That sum would come out of the $40bn in emergency spending that Congress approved last week for recovery and victim relief efforts.
It is not looking good out there...
VTOL
Friday, 21 September, 2001, 07:06 GMT 08:06 UK
Airlines 'threaten to stop flying'
EU finance ministers will discuss subsidies for airlines
Leading UK airlines have reportedly warned Trade Secretary Stephen Byers they might be forced to ground their planes from Tuesday unless the government insures them for terrorist acts.
Airlines around the world said on Thursday that underwriters had given notice they would cancel cover for war liabilities from midnight Monday, the Financial Times newspaper said.
Ten airlines including British Airways, Virgin Atlantic warned in a letter to Mr Byers that reductions in insurance cover for third party injury could put them in breach of contracts with the companies from which they lease aircraft and stop them flying, it said.
The government is to hold crisis talks with airline and insurance company bosses on Friday.
It is also examining emergency measures, including a scheme that would see the government underwriting commercial airlines' insurance, to keep the airlines flying.
The news comes as the US Congress and the White House agreed a $15bn plan to bail out the airline industry in the aftermath of last week's terrorist attacks.
Emergency measures
The letter says insurers are offering third party insurance of just £34m, much less than the £515m typically demanded by aircraft leasing companies.
A spokeswoman for British Airways told BBC News Online: "We are talking to the insurance companies about the situation. We are aware of their concerns."
She refused to comment on the FT report that the airlines had threatened to stop flying.
Meanwhile, European Union finance ministers will hold an informal meeting on Friday to discuss the economic impact of the attacks on the US and the possible easing of rules on state subsidies for airlines.
In the US, President Bush has asked Congress to amend legislation on war risk insurance provided by the Department of Transport to cover domestic US flights, eliminating the risk of carriers being unable to find insurance and offsetting rate increases, his spokesman Ari Fleischer said on Thursday.
Security improvements
Insurance experts say that in some instances premiums have increased tenfold since last week's attack.
David Worsfold, editor of insurance industry journal Post, said cover for planes was still available but airlines were having difficulty securing liability insurance, to cover the risk of terrorist attack or war.
He said airlines could normally expect up to £1.5bn of liability, but this had now been reduced to £50m at best, which was not enough.
But, he added, insurance companies wanted to see a dramatic improvement in airline security before premiums would come down.
"Their (the airlines) attempts to improve security at airports could be described as inconsistent and haphazard at best," he told BBC Breakfast.
"You cannot expect insurance companies to be sympathetic to the airlines, if they cannot get that right," he added.
Overstating the case
Some industry figures believe the airlines are overstating the case for state aid.
Michael O'Leary, chief executive of low cost airline Ryanair told BBC Radio 4's Today programme: "There were going to be large job losses on the way already.
"Companies were losing money before last week.
"Last week's events have brought it forward."
Mr O'Leary said that rather than "begging" money from European governments, airlines should slash fares.
"We continue to take the same number of bookings per week as we did before the tragic events in the US last week," he added.
US rescue package
The US government's airline rescue package includes $5bn in direct grants to the airlines.
The US government will also provide the airlines with loan guarantees of $10bn.
US Transport Minister Norman Mineta said there was also an agreement that the federal government would spend $3bn to upgrade security in airplanes and airports.
That sum would come out of the $40bn in emergency spending that Congress approved last week for recovery and victim relief efforts.
It is not looking good out there...
VTOL
Guv, I think you miss-understood. I am not loking for the attack on you, I was after details of your company so I can decide for myself as there is a lot of insulting from both sides but no information.
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Some of the larger airlines could quite easily self-insure their hulls, if they either own them or have a structure in place that would be acceptable to their financiers. In fact, it's something that has been quietly going on for many years.
Hull liability, though, is not the problem. It's third party liabilith claims arising under War Risks cover: Insurers will provide limited war risk coverage to carriers considered good risks; however, coverage for death or injury to third parties and property on the ground has been limited to $50 million for any one event and in aggregate.
I've seen reports that the claims from last week's attacks could rise as high as US$100 billion. Those sorts of numbers could never be covered by any airline - or even consortium of airlines; and with the exception of two or three of the world's largest insurers (AIG, which owns ILFC springs to mind) I doubt that even they could carry more than a percentage. Cover effected through Lloyds of London is paid out by 'Names' - high net worth individuals who have unlimited liability. The number of Names has decreased over the last decade or so due to various problems, not least that many felt they were being ripped off by underwriters and a long-standing suit against Lloyds resulted.
The fact is that all sectors of the insurance market are there to make money - the general concept being that they build up vast amounts to cover any possible losses; and anything over and above that amount - as determined by actuaries - is deemed to be distributable profit. With a situation such as we have seen, these reserves are insufficient to withstand another such incident (and in the cases of some insurers may well be insufficient to withstand existing liabilities) - and therefore they have to increase premiums to cover this exposure.
Do I think that a 500% premium increase for a carrier that has no history of losses is fair? Hell, no. But that's the sort of deficiency in the premium pool that the insurers are facing.
In a situation such as this, there is another option - government cover. Following the City bombings, the government set up its own underwriter - Pool Re, as I recall - to write cover for businesses in the City when the markets refused to. If governments around the world agree to act as Insurer of Last Recourse, then this may well solve the problem. In effect though, the only governments at risk will be the US, UK and other Coalition member countries and of course any countries which face the wrath of the Coalition forces.
My knowledge of the insurance business is fairly limited, so if I have made any errors in the above analysis please accept my apologies - and hopefully someone in the know such as BFU could correct them?
[ 21 September 2001: Message edited by: The Guvnor ]
Hull liability, though, is not the problem. It's third party liabilith claims arising under War Risks cover: Insurers will provide limited war risk coverage to carriers considered good risks; however, coverage for death or injury to third parties and property on the ground has been limited to $50 million for any one event and in aggregate.
I've seen reports that the claims from last week's attacks could rise as high as US$100 billion. Those sorts of numbers could never be covered by any airline - or even consortium of airlines; and with the exception of two or three of the world's largest insurers (AIG, which owns ILFC springs to mind) I doubt that even they could carry more than a percentage. Cover effected through Lloyds of London is paid out by 'Names' - high net worth individuals who have unlimited liability. The number of Names has decreased over the last decade or so due to various problems, not least that many felt they were being ripped off by underwriters and a long-standing suit against Lloyds resulted.
The fact is that all sectors of the insurance market are there to make money - the general concept being that they build up vast amounts to cover any possible losses; and anything over and above that amount - as determined by actuaries - is deemed to be distributable profit. With a situation such as we have seen, these reserves are insufficient to withstand another such incident (and in the cases of some insurers may well be insufficient to withstand existing liabilities) - and therefore they have to increase premiums to cover this exposure.
Do I think that a 500% premium increase for a carrier that has no history of losses is fair? Hell, no. But that's the sort of deficiency in the premium pool that the insurers are facing.
In a situation such as this, there is another option - government cover. Following the City bombings, the government set up its own underwriter - Pool Re, as I recall - to write cover for businesses in the City when the markets refused to. If governments around the world agree to act as Insurer of Last Recourse, then this may well solve the problem. In effect though, the only governments at risk will be the US, UK and other Coalition member countries and of course any countries which face the wrath of the Coalition forces.
My knowledge of the insurance business is fairly limited, so if I have made any errors in the above analysis please accept my apologies - and hopefully someone in the know such as BFU could correct them?
[ 21 September 2001: Message edited by: The Guvnor ]
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There has been mention of airline insurers ‘taking the money in the good times’ and ‘running in the bad times’. Just to put this into perspective, for the three years starting 1 January 1998 total worldwide airline insurance premiums (excluding hull war risks) were around US$3.2 billion and losses for the same period were in excess of US$5.3 billion. The terrorist attack in Sri Lanka took away ten years worth of hull war premiums.
This year the insurance market was seeing sustained premium increases for airlines – not enough to return the market to profitability in a year of ‘average’ claims, but certainly in the right direction.
Can anyone honestly argue that nothing should be done in the aftermath of the attack? I hate knee-jerk reactions and the restriction in third party liability coverage is a big concern – but it will do nobody any good if there are no insurers left to carry the risk after the dust has finally settled.
Airline insurers have to cover massive exposures ($200m for a hull and $2bn for liability) off an incredibly narrow premium base. I read somewhere a few years ago that worldwide airline premiums were less than one percent of the U.S. plate glass insurance premiums. How many plate glass policies have a potential exposure in excess of two billion dollars?
This year the insurance market was seeing sustained premium increases for airlines – not enough to return the market to profitability in a year of ‘average’ claims, but certainly in the right direction.
Can anyone honestly argue that nothing should be done in the aftermath of the attack? I hate knee-jerk reactions and the restriction in third party liability coverage is a big concern – but it will do nobody any good if there are no insurers left to carry the risk after the dust has finally settled.
Airline insurers have to cover massive exposures ($200m for a hull and $2bn for liability) off an incredibly narrow premium base. I read somewhere a few years ago that worldwide airline premiums were less than one percent of the U.S. plate glass insurance premiums. How many plate glass policies have a potential exposure in excess of two billion dollars?
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The UK charter airlines and most of the European charter airlines are passing the $1.25 per pax per sector charges on to the Tour Operators / Sole Use Charterers....so either they absorb it or pass it on to their clients - either way....they aint gonna be paying it! Will be interesting to see what extra airport security charges are gonna be charged.......and guess who`s gonna pay for them!! 
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Notso, if its your mission in life to monitor these boards for any posts by Guv, then jump in without reading them (preferred)and launch a personal and vitriolic attack on him, then I have to say 'mission accoplished, come on home'.
All the Guv does is scan the internet for important information, brings them to our attention so we can debate them (like adults). These aren't his opinions, these are verifiable facts.
Perhaps now you could monitor these boards and if you see one by the Guv don't read it!
Therefore you won't get upset and you won't divert or hijack the original direction of the thread.
Your sort of behaviour is entirely unbecoming in an airline captain (thats my opinion so you can attack that if you like).
Pengineer
(No I'm not the Guv)
All the Guv does is scan the internet for important information, brings them to our attention so we can debate them (like adults). These aren't his opinions, these are verifiable facts.
Perhaps now you could monitor these boards and if you see one by the Guv don't read it!
Therefore you won't get upset and you won't divert or hijack the original direction of the thread.
Your sort of behaviour is entirely unbecoming in an airline captain (thats my opinion so you can attack that if you like).
Pengineer
(No I'm not the Guv)
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Following from what Lazlo posted on page 2- today's copy of the Times has an article which gives rise for some cheer amongst the doom & gloom;
Wartime laws return to help airlines
[ 21 September 2001: Message edited by: Base leg ]
Wartime laws return to help airlines
[ 21 September 2001: Message edited by: Base leg ]
Join Date: Mar 2000
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Notso,
I love the Guv eh ? Really old chap, you should put more water in your tipple. He's really not my type
If you spent a moment to read some of my old posts, you will find I have argued against the Guv's opinion on more than one occassion.
My point is that we are all adults, and quite capable of judging a fellow PPruner without repeated references to a rather old web page.
I find it particularly sad that at a time when there are real crisis issues affecting us all, a thread's impact is reduced to petty arguing, character assasination and point scoring.
The Guv posted what is now clearly THE top story for the industry yesterday, to which you could do nothing more than post the same, repetetive and frankly BORING regurgitated clap trap (whether it's true or not is irrelevant).
Get out more old chap; monumental things are happening beyond the limits of your PC screen at the moment.
I love the Guv eh ? Really old chap, you should put more water in your tipple. He's really not my type
If you spent a moment to read some of my old posts, you will find I have argued against the Guv's opinion on more than one occassion.
My point is that we are all adults, and quite capable of judging a fellow PPruner without repeated references to a rather old web page.
I find it particularly sad that at a time when there are real crisis issues affecting us all, a thread's impact is reduced to petty arguing, character assasination and point scoring.
The Guv posted what is now clearly THE top story for the industry yesterday, to which you could do nothing more than post the same, repetetive and frankly BORING regurgitated clap trap (whether it's true or not is irrelevant).
Get out more old chap; monumental things are happening beyond the limits of your PC screen at the moment.