the battle of the aviation industry to cope with weapons of mass destruction and with governments
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The Battle of the Aviation Industry to Cope with Weapons of Mass Destruction (and with Governments). by Ralf Oelßner and Prof. Dr. Wolf Müller-Rostin, Delvag Aviation Insurance, Cologne. Insuring the uninsurable. Hull Insurance.

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the battle of the aviation industry to cope with weapons of mass destruction and with governments

The Battle of the Aviation Industry to Cope with Weapons of Mass Destruction (and with Governments)

by Ralf Oelßner and

Prof. Dr. Wolf Müller-Rostin,

Delvag Aviation Insurance,

Cologne

insuring the uninsurable
Insuring the uninsurable

Hull Insurance

  • Partial coverage for hull damages caused by weapons of mass destruction (WMD) first introduced by insurers in May 2005
  • Operating without hull coverage for WMD is no violation of legal requirement to maintain adequate insurance coverage, however, hull coverage necessary for financial stability of an air carrier
insuring the uninsurable3
Insuring the uninsurable

Liability Insurance

  • All operators’ and service providers’ aviation liability insurance policies subject to War, Hijacking and Other Perils Exclusion Clause (AVN 48 B)
insuring the uninsurable4
Insuring the uninsurable
  • Most exclusions of AVN 48 B could normally be written back into policy coverage by Extended Coverage Endorsement AVN 52 E
  • Most policies only excluded cover for damages caused by any hostile detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter
insuring the uninsurable5
Insuring the uninsurable

Clauses proposed by the Aviation Insurers

  • Replacement of AVN 48 B by AVN 48 C
  • Write backs by AVN 52 H
    • Extended Coverage Endorsement (Aviation Liabilities) applicable to coverage provided to aircraft operators
  • Write backs by AVN 52 J
    • Extended Coverage Endorsement (Aviation Liabilities) applicable to coverage provided to service providers
insuring the uninsurable6
Insuring the uninsurable

The clauses proposed by the aviation insurers intend to exclude all cover for the hostile use of WMD, namely nuclear, radioactive contamination, biological, chemical and electromagnetic pulse devices or materials

insuring the uninsurable7
Insuring the uninsurable

Clauses proposed by AEA / IATA / Marsh

  • Replacement of AVN 48 B by AVN 48 D
  • AVN 52 K for aircraft operators
  • AVN 52 L for service providers

The scope of AVN 48 D, AVN 52 K and AVN 52 L is to provide at least limited liability coverage for the hostile use of radioactive contamination, biological, chemical, electromagnetic pulse device or matter in addition to the other perils normally written back by AVN 52 clauses.

insuring the uninsurable8
Insuring the uninsurable

„At least limited coverage“ means coverage under either

  • single aircraft cover or
  • regulatory / corporate governance compliance cover

thus providing flexibility in the write backs of perils for insured by selecting between various write back options and choices depending on anticipated loss scenarios.

insuring the uninsurable9
Insuring the uninsurable

Single aircraft coverage covers WMD damages to an aircraft

  • on board of which the WMD device solely and directly originates (in flight or on the ground) or
  • that suffers a crash fire explosion, a collision or a recorded emergency resulting from a WMD (except EMP) peril originating external (i. e. by missile ) to the aircraft while in flight.

Excluded is coverage for any aircraft, that flies through a WMD contamination cloud and lands normally. Reason for exclusion: multi aircraft contamination possible.

insuring the uninsurable10
Insuring the uninsurable

Regulatory / corporate governance compliance coverage provides the opportunity to cover all WMD damages, but only

for restricted limits as per negotiation.

Example: Explosion of aircraft covered under Single Aircraft Coverage affects other passengers of the same carrier who are sitting in other aircraft or waiting in the terminal.

Passengers of other carriers (third party liability) would be covered by the third party aggregate limit available under the Single Aircraft Coverage or Regulatory Coverage, whichever is higher.

insuring the uninsurable11
Insuring the uninsurable

Coverage under AVN 52 L (Service Providers) basically same as AVN 52 K, except for coverage for passengers, baggage, cargo and mail.

insuring the uninsurable12
Insuring the uninsurable
  • Operating without complete liability insurance coverage is in violation of EU Regulations 2407/92 and 785/2004 and of

Art. 50 MC

  • also in violation of most lease contracts and of corporate governance
  • consequences: grounding of the fleets
insuring the uninsurable13
Insuring the uninsurable

AEA, IATA / Marsh in discussions with EU-Commission to clarify whether clauses would be deemed compliant with EU-Regulation 785/2004 (in particular passenger limit of 100.000 SDR [in contrast to 250.000 SDR required under the Regulation] in case of airport attack).

insuring the uninsurable14
Insuring the uninsurable
  • Czech carriers operating under a State Guarantee
  • Irish Government enacted Air Navigation and Transport (Indemnities) Act of 2005
    • Scope: to provide indemnities by the government to Irish air carriers, airports, aerodromes and service providers in a „state of difficulty“
    • Indemnities limited to Euro 9 billion in the aggregate
    • EU and other governments unwilling to act proactively
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