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18 Air & Space Law. 1 (2003-2004)

handle is hein.journals/airspaclaw18 and id is 1 raw text is: AIR L A AMERICAN BAR ASSOCIATION & War Risk Insurance in the Aftermath of September 11 By Rod D, Margo ijacking and terrorism are nothing new to the air- line and aviation Insurance Industries.' While the so-called Cuban hijackings of the 1960s were characterized by Ihe gratuitous mistreatment or innocent passengers, the aircraft were usually recovered after the hijacking terminated. In the 1970s, civil aircraft became more and more targets of acts of sabotage that resulted In serious damage to, or total destruction of, the aircraft. The international Insurance market responded to these events by adopting clauses designed to exclude from the standard airline hull and liability policy loss or damage resulting front hijacking, war, and associated risks, The first war and hijacking exclusion clause, AVN 48, was introduced In 1969 In response to an Israeli corn- mando raid on Beirut airport in )ecember 1968. The clause was amended and reissued in 1970 as AVN 48A to exclude Inter alia terrorism as a risk. In August 1971, in response to the hijackings of September 1970, AVN 48A was replaced by the War, Hijacking and Other Perils Exclusion Clause (AVN 4811), which is currently in use in the London aviation market and excludes the risks of war and its associated perils from airline hull and liability Insurance policies. An airline wishing to obtain coverage In relation to war and associated perils could do so either by means of a write-back endorsement (or extended coverage endorsement) inserted into the airline's existing all risks policy, or by way of a stand-alone war risks policy issued by specialist war risk Insurers, Under AVN 51 -the extended coverage endorsement used In London prior to September 11 regarding aircraft hulls-the risks that could be written back Into a hull all- risks policy were typically confined to those excluded by paragraiphs (c), (e), and (g) of AVN 48H, i.e., riots, strikes, and civil commotions; any malicious act or act of sabotage; and hijacking or unlawful seizure of aircraft. it the case of liabilities, all risks excluded by ANrN 48B, with the exception of detonation of a nuclear weapon, were typically written back into a liability all-risks policy under AVN 52C. War risk insurers have generally reserved the right to give seven days' notice of cancellation to permit them to reassess the risk, ard, if necessary, amend or cancel the coverage, in the event of a radical and adverse change In conditions or circumstances. However, insurers would consider reinstating the policy If agreement could be reached with the Insured on a new premium rate, condi- tions, and geographical limits. War risk coverage may ter- minate automatically on the outbreak of war between the major powers, listed as the United Kingdom, Prance, the United States, the Russian Federation, and the People's Republic of China. Historically, war risk coverage tinder AVN 52C was available for some 10 percent of the premium paid for overall liability coverage, While the amount paid out in airline hull, passenger, and third-party liability claims exceeded the total collected in premiums by some $2.75 billion between 1998 and 20(10, competitive market forces were such that, immediately prior to September 11, 2001, coverage provided under AVN 52C was gener- ally available for a minimal additional premium, and, In some cases, for no additional premium. Aviation Insurance Market's Response to 9/11 The fact that terrorist risk exposure to airlines and their insurers had become unquantiflable overnight pre- cipitated an Insurance market failure. On September 17, 2001, Insurers In the London aviation market began Issu- Ing seven-day notices of cancellation to their insured air- continued on page 17 Forum on Air and Space Law THE

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