Insuring the Air Transport Industry Against Aviation War and Terrorism Risks and Allied Perils : Issues and Options in a Post-September 11, 2001 Environment

This book explores the central problems underlying the insurance of aviation war and terrorism risks and associated perils. It critically analyses the reasons why conventional insurance markets are unwilling or unable to provide sustainable insurance coverage for aviation war and terrorism risks in the aftermath of catastrophic events such as the terrorist events of September 11, 2001. It also examines some of the prominent concepts proposed and/or implemented after 9/11 to determine whether and to what extent these concepts avoid identified pitfalls. Like many of life’s essentials, the importance of insurance is most evident when it is not available. The sheer scale and magnitude of the insurance losses that followed 9/11 caused conventional insurance markets (which hitherto had been offering generous insurance coverage for aviation war and terrorism risks to air transport operators for little or no premium) to withdraw coverage forthwith. The ensuing absence or insufficiency of commercial insurance coverage for aviation war and terrorism risks has sparked a global search for viable and sustainable alternatives. Ten years have since elapsed, and despite numerous efforts, the fundamental problems remain unresolved. The book proceeds on the premise that the underlying issues are not entirely legal in nature; they have immense economic, psychological and policy implications that cannot be underestimated. A multidisciplinary approach is therefore used in examining the issues, drawing heavily upon analytical principles adapted from law and economics and behavioural law and economics. It is hoped that the resulting study will be beneficial not only to lawyers and those interested in aviation insurance but also to economists, air transport insurance program managers, capital market investors and governmental policymakers, both at the national and international levels. Insuring the Air Transport Industry Against Aviation War and Terrorism Risks and Allied Perils 4 Issues and Options in a Post-September 11, 2001 Environment 4 Foreword 6 Preface 8 Acknowledgments 12 Contents 14 List of Acronyms 20 Chapter 1: Introduction 22 Chapter 2: The Insurance of Aviation Risks by the Conventional Insurance Markets 37 Chapter 3: The Insurance of Aviation War and Terrorism Risks by Specialist War Insurance Markets 91 Chapter 4: Catastrophic Risks and Reflexes: Some Theoretical Perspectives on the Use of Insurance as a Risk Management Tool for Large Catastrophic Risks 135 Chapter 5: Enhancing the Insurance of Aviation War and Terrorism Risks Through the Use of Alternative Risk Transfer and Risk Financing Mechanisms 176 Chapter 6: The Insurability of Aviation War and Terrorism Risks Under ICAO ́s Unlawful Interference Convention of 2009 222 Chapter 7: Governmental Involvement in the Insurance of Aviation War and Terrorism Risks 254 Chapter 8: Findings and Conclusions: Towards Sustainable Insurance of Aviation War and Terrorism Risks 290 Appendix A Specimen FAA War Risk Insurance Policy 297 Appendix B The Government of Canada’s Undertakingwith Respect to War Risk Insurance 325 Appendix C Measures Planned or Taken by EU Member States to Assist Air Transport Operators Cover the Additional Costs of Insurance in the Immediate Aftermath of September 11, 2001a 330 References 334 Index 336 Front Matter....Pages i-xx Introduction....Pages 1-15 The Insurance of Aviation Risks by the Conventional Insurance Markets....Pages 17-70 The Insurance of Aviation War and Terrorism Risks by Specialist War Insurance Markets....Pages 71-114 Catastrophic Risks and Reflexes: Some Theoretical Perspectives on the Use of Insurance as a Risk Management Tool for Large Catastrophic Risks....Pages 115-155 Enhancing the Insurance of Aviation War and Terrorism Risks Through the Use of Alternative Risk Transfer and Risk Financing Mechanisms....Pages 157-202 The Insurability of Aviation War and Terrorism Risks Under ICAO’s Unlawful Interference Convention of 2009....Pages 203-234 Governmental Involvement in the Insurance of Aviation War and Terrorism Risks....Pages 235-270 Findings and Conclusions: Towards Sustainable Insurance of Aviation War and Terrorism Risks....Pages 271-277 Back Matter....Pages 279-322