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Wed, Oct 25, 2023

Aviation War Insurers Cancel Coverage over Israeli-Hamas Conflict

Increasing Risk, Decreasing Reward

As conflict in the region intensifies and flight cancellations mount, aviation war insurers are making ready to cancel coverage for a number of air-carriers domiciled in Israel and Lebanon; so state industry sources with knowledge of the matter.

Aviation war insurers based in Europe, the United States, and the Lloyd's of London market are legally entitled to issue seven-day notices of cancellation or other changes to policy terms and conditions in the event a major conflict is determined by underwriters to pose a legitimate threat to commercial aircraft operations, thereby rendering long-term insurance coverage overly-risky.

Insurers for Israeli flag carrier El Al Airlines. Israir, and Arkia previously iterated their ability to issue such notices on account of the war between Israel and the Palestinian group Hamas. Comes now 23 October 2023, and as-of-yet undisclosed Israeli airlines have received notices of imminent policy cancellation.

Hive Underwriters chief underwriting officer Bruce Carman stated: "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.”

Israel's parliamentary finance committee has approved a plan to provide a state guarantee of $6-billion to cover insurance against war risks to Israeli airlines.

Spokesmen for Israeli airlines El Al and Arkia did not directly respond to questions pertaining to whether insurers had yet served notice of policy cancellation, but disclosed the Israeli government is currently providing sufficient coverage to permit aircraft operations to continue safely.

A spokesman for Israir reported the airline had not yet been served notice by its insurers, but provided no additional details.

Israeli carriers have continued to fly while most foreign airlines have canceled flights to Tel Aviv, expanding flights to bring back those traveling 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," remarked Garrett Hanrahan of Marsh's Global Aviation.

Mr. Hanrahan added: "These operators did not have operational experience flying into Israel and not under conditions where there is a conflict taking place.”

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 five 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 reportedly facing other restrictions.

A spokesman for insurance buyers' association Airmic's aviation group set forth: "Insurers want regular updates - each airline has a different risk profile and therefore different risk mitigation strategies.”

The airlines are not yet facing additional premiums for their scheduled flights, the aforementioned industry sources asserted. However, two of the unnamed sources suggested air-carriers operating in the vicinity of the conflict may be required to leave their aircraft on the ground at airports in Tel Aviv or Beirut for no more than three hours, or to avoid refueling stops at those airports.

Mr. Hanrahan stated: "If for whatever reason they [aircraft] are delayed, they need to be communicating with underwriters.”

Special flights undertaken for purpose of evacuating people from Israel would require a "material change" to an airline's policy, and airlines are facing additional premiums of between 0.05-percent and 0.1-percent of the value of the aircraft for those flights, one broking source reported.

Norwegian Air recently canceled a planned evacuation flight due to lack of insurance to fly via Tel Aviv, but later scheduled such a flight from Eilat in southern Israel.

FMI: www.usau.com

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