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The Commonwealth has extended the current indemnities it has been providing to airlines, airports and air services operators for aviation war risk insurance until the end of April.
Following the terrorist attacks in the United States on September 11, there was a worldwide withdrawal of third party war risk insurance by the insurance market.
Martin Dolan, First Assistant Secretary of the Airports and Aviation Divisions of the Department of Transport and Regional Services, said that the Commonwealth had stepped in last September to make temporary indemnity cover available.
"In recognition of the gap left in the war indemnity market, the Commonwealth put in place this stop-gap measure to make sure those involved in aviation and aviation services were not left with insufficient cover and the possibility of being exposed," Mr Dolan said.
Under the terms of the Commonwealth's cover, eligible operators are required to obtain and maintain commercial war risk cover to the fullest extent available in the market place. That has been consistently lower than that available before September 11. At present the Commonwealth is providing cover for the difference free of charge.
"We need to make sure that the Commonwealth's assistance in this area doesn't prevent the revival of the commercial war risk insurance market. Also, the Commonwealth has a responsibility to Australian taxpayers to reduce the potential exposure to the public purse," Mr Dolan said.
Following the Department's constant review of the level of coverage available on the commercial insurance market, the Government will advise many operators that they will need to increase their level of commercial cover.
The Government's top-up cover has been extended until the end of April 2002 for airlines, and 6 May 2002 for airports, security and other aviation service providers.
In the meantime, the Commonwealth is working closely with Australian and international organisations to consider both domestic and international longer-term responses to the war risk insurance issue. The Government is expected to take a decision on the future of its cover in May.
"We are encouraged by the international scheme under consideration by the International Civil Aviation Organisation (ICAO) whereby aviation war risk coverage would be provided by a non-profit company with multi-lateral government backing. The ICAO proposal is being seriously analysed and will be considered as one possible solution," Mr Dolan said.
All of the longer-term options under examination will involve a commercial charge for the Government component and an 'excess' that will need to be covered by commercial insurance.
Further information on the current war risk indemnity cover can be found under latest information on the Department's website.
Media Contact:
Kate Robinson - (02) 6274 8059
AVIATION WAR RISK INDEMNITY - CRITERIA
Following the 11 September 2001 terrorist events in the United States, existing aviation war risk insurance (including terrorism and hijacking) was withdrawn from the global marketplace from 24 September or shortly thereafter. To ensure continuity of operations, the Commonwealth agreed to provide third party war, terrorist and hijacking indemnity cover for damage on the ground to airlines, airports, and other service and facilities providers. The current indemnity is provided on a month to month basis.
Is my organisation eligible?
Air carriers, airports and all key service and facility providers associated with the aviation sector that held third party war risk insurance cover prior to its cancellation on 24 September 2001 are eligible for the Commonwealth's indemnity.
This includes:
- Civil Aviation Safety Authority (CASA) and Airservices Australia;
- Airport operators, including leased federal airports and smaller regional airports;
- Security screening companies operating at Australian airports;
- Freight forwarders and cargo agents; and
- Ground handling agents.
In addition organisations which have recently been appointed as aviation security screening authorities are also eligible.
Will my organisation need to purchase any war risk insurance from the market?
You are required to purchase commercial war risk insurance cover from the market as it becomes available, as determined by the Commonwealth. In line with the increasing level of coverage offered by the insurance market, the Commonwealth intends to progressively increase the amount of coverage you will be required to purchase commercially in order to remain eligible for its war risk indemnity.
What does my organisation need to do throughout the term of the indemnity?
You are required to actively seek war risk insurance from the market as outlined above AND report to the Commonwealth fortnightly through established mechanisms on your efforts to do so.
What does the indemnity cover?
The Government's policy decision provides indemnities that are limited to the least amount of the following applicable criteria.
The indemnity covers the gap between the amount of third party war risk insurance available commercially and:
For those who held war risk cover under AVN52 C on 24 September 2001, where the main aviation insurance policy is still current:
- the level of war risk cover held by the organisation pre 24 September 2001. The circumstances covered by the indemnities are consistent with the terms of the pre-existing cover;
For other eligible organisations, including those that have renewed their aviation insurance cover:
- the organisation's level of cover for all risks as defined by its main/general aviation insurance policy, subject to the following maximum caps:
- US$500 million for carriers operating aircraft with 50 seats or less;
- US$1 billion for firms with operations within Australia only, operating aircraft with more than 50 seats;
- US$2 billion for firms with domestic and international operations;
For newly appointed screening authorities:
- the organisation's level of cover for all risks as defined by its main/general aviation insurance policy, where an organisation did not have separate insurance before 11 September.
For more information contact Simon Clegg, Leader of the War Risk Indemnity Taskforce on (02) 6274 7323.
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