Insurance crisis has airlines on ropes

By SCOTT MacLEOD

The world's airline industry, reeling from the terror strikes in the United States, face an insurance crisis that could ground some aircraft.

And New Zealand's three biggest travel insurers have scrapped policy clauses that let tourists claim compensation when airlines, hotels, bus firms and other providers go bust while they are on holiday.

Air New Zealand and Qantas are among dozens of airlines told that, from next Tuesday, their war risk insurance policies will be scrapped.

The two Australasian carriers are seen as low-risk and have negotiated new policies that will raise their airfares by about $3, but some US airlines unable to get cover say it is becoming too risky for them to fly.

The moves come as insurance firms grapple with massive compensation claims from the suicide attacks involving jet airliners last week. The bill could top $100 billion for the insurers of American Airlines and United Airlines.

Thousand of airline workers have been laid off in the wake of the terrorist attacks, as US industry chiefs predict up to 100,000 jobs lost from firms struggling to survive. Air NZ refuses to say what impact the crisis will have on its troubled outlook.

In the US, routes have been dropped and flight schedules slashed. Big airlines in Asia and Europe are cutting back services, and British Airways has confirmed the loss of 5200 more jobs.

President George W. Bush has proposed a $NZ11.6 billion handout to help US airlines and assist with insurance liabilities, but has stopped short of the $NZ29 billion the industry says it needs to stave off bankruptcies.

According to some estimates, the crisis is costing US airlines $2.3 billion a day.

Some insurance firms insist it is now too risky to offer "full war and terrorism" insurance unless Governments help with any payouts.

The three biggest travel insurance managers in New Zealand, QBE Insurance International, Mike Henry (NZ) and Tower Insurance, all scrapped the insolvency clauses in their standard travel policies between Tuesday and Thursday. They will honour any policies sold before that.

QBE travel insurance manager Rick Ballinger said his firm had been hit by Ansett and the terrorist attacks. It would continue to cover sickness, lost bags and other standard travel problems, but it was now up to consumers to chose airlines and tour operators more carefully.

Mike Henry managing director, travel, Steve Nichols said there had been a big increase in claims for delays after the Ansett collapse and terrorist attacks.

"The events of last week tipped the scales," he said. "The risk is beyond what we set out to provide."

Insurance Council chief executive Christopher Ryan urged all travellers to check their policies to make sure they knew what they were covered for.

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The fatal flights

Emergency telephone numbers:

United Airlines

: 0168 1800 932 8555

American Airlines

: 0168 1800 245 0999

NZ Ministry of Foreign Affairs and Trade

: 0800 872 111

US Embassy in Wellington (recorded info): 04 472 2068

Victims and survivors