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Airlines to be allowed to insure against ash risk

Loss of business caused by natural phenomena such as volcanic ash clouds will become insurable for the first time, aviation insurer Swiss Re has announced.

It is launching a product that will cover "non-damage business interruption" losses. The insurable causes of disruption can include atmospheric ash, the results of seismic activity such as earthquakes, and meteorological phenomena such as floods, storms and snow, Swiss Re director Oliver Dlugosch told delegates at the 27 January JLT Aviation Insurance Conference in Dubai.

Dlugosch emphasised that the cover will only be for the business losses caused by the phenomena, not any physical damage that may be caused, and that cover is not being offered for business losses caused by war, pandemics or GPS failure.

The cost of cover will depend on how much risk the customer airline is prepared to take on itself. For example, it would be cheaper if the airline were to agree to be covered only for losses resulting from a disruption that continued beyond six days, or for the losses owing to flight cancellations beyond an agreed threshold.

Dlugosch says he is not sure what level of interest this offer will generate, because he believes many airlines may continue to self-insure. He adds that it would be important to spread the risk geographically because too big a take-up in a single geographical area such as Europe for ash cloud disruption, for example, would expose the insurance industry to an unsustainably high risk.

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