Aviation War Insurers Reduce Coverage for Israel and Lebanon Due to Gaza Conflict
War insurers in the aviation industry have informed certain airlines based in Israel and Lebanon that they will be canceling their coverage due to the ongoing conflict in the region. According to three industry sources familiar with the situation, some cancellations have already been put into effect.
Aviation war insurers located in Europe, the United States, and the Lloyd’s of London market have the authority to provide a 7-day notice of cancellation or adjust terms and conditions if they determine that a significant conflict could pose an increased long-term insurance risk.
According to two sources who spoke to Reuters, Israeli airlines including El Al Airlines, Israir, and Arkia have now been informed by their insurers that they can issue notices due to the ongoing conflict between Israel and the Palestinian group Hamas. The exact airlines were not named in the report.
“War underwriters’ appetite for continuing to cover these risks for no additional reward differs and some are now looking to withdraw cover, especially given the news the Israeli government has provided a backstop to cover flights,” said Bruce Carman, chief underwriting officer at Hive Underwriters.
Israeli’s parliamentary finance committee last week approved a plan to provide a state guarantee of $6 billion to cover insurance against war risks to Israeli airlines.
Spokespeople for Israeli airlines El Al and Arkia did not directly respond to questions from Reuters about whether insurers had served notice but said the government was providing all necessary coverage for them to continue operations safely.
A spokesperson for Israir said it had not been served notice by its insurers, but did not provide additional details. A spokesperson for Lebanese carrier Middle East Airlines did not immediately respond to requests for comment.
Israeli carriers have continued to fly while most foreign airlines have cancelled flights to Tel Aviv, expanding flights to bring back those travelling abroad and those called up to reserve service for the military.
Airlines normally take out two types of policy – an “all risks” policy which covers both regular damage to the hull and passenger liability, and a “war” policy to cover war or terror-related losses to the aircraft.
“Certain underwriters have not allowed or not provided insurance for war risk and other allied perils insurance for some operators,” Garrett Hanrahan, Marsh’s Global Aviation Leader, told Reuters.
“These operators did not have operational experience flying into Israel and not under conditions where there is a conflict taking place,” he added.
Another of the insurers’ biggest concerns is for aircraft stuck on the ground in conflict zones. Middle East Airlines this week said it will keep 5 of its 24 airplanes in Turkey, following rocket, missile and artillery exchanges between Israel and Hezbollah.
Airlines based outside Israel and Lebanon are not suffering from cancellations to their cover for the region but are facing other restrictions, two industry sources said.
“Insurers want regular updates – each airline has a different risk profile and therefore different risk mitigation strategies,” said a spokesperson for insurance buyers’ association Airmic’s aviation group.
The airlines are not yet facing additional premiums for their scheduled flights, the sources said.
But they may be required to leave their aircraft on the ground at airports in Tel Aviv or Beirut for no more than three hours, for example, or to avoid refuelling stops at those airports, two sources added.
“If for whatever reason they [aircrafts] are delayed, they need to be communicating with underwriters,” Hanrahan said.
Special flights to evacuate people from Israel would require a “material change” to an airline’s policy and airlines are facing additional premium of between 0.05% and 0.1% of the value of the aircraft for those flights, one broking source said.
There could be up to 20 insurers on one policy and it may be hard to get them all to agree to cover a flight, sources said.
Norwegian Air cancelled a planned evacuation flight last week due to lack of insurance to fly via Tel Aviv, but later scheduled a new flight from Eilat in southern Israel.
The current war between Israel and Hamas has seen 3,785 Palestinians in Gaza killed by Israeli airstrikes, as well as over 1,400 Israeli’s killed during Hamas’ initial assault on southern Israel on 7 October.
Alongside Israel’s bombardment of the Gaza Strip, Israel has increased it’s raids on the occupied West Bank and the Lebanese-Israel border has witnessed an uptick in clashes between Hezbollah and the Israeli army.
(Reuters & The New Arab)
