Dirty bomb risk haunts aviation

By Peter Chapman

Date: 18/11/04

EUROPEAN airlines and airports fear they could be left exposed to huge financial risk as insurance companies threaten to remove cover for damage caused by radioactive 'dirty bombs'.

The transport industry can currently obtain limited cover for many terrorist risks provided they pay for the privilege. But insurers are considering inserting dirty bombs - alongside detonation of standard nuclear weapons - on a short-list of events they would refuse to cover at any price.

That would expose airlines, airports or other groups, such as security guards, to huge potential liabilities for the damage to third parties - for example, if a dirty bomb is smuggled on board a plane that is then crashed into buildings, as in the 9/11 attacks on the US.

Ulrich Schulte-Strathaus, secretary-general of the Association of European Airlines, says the move would saddle operators with "risks so high that they would be forced to ground their fleets".

Anti-terrorism experts reckon that dirty bombs are the most likely way for terrorists to wreak havoc with radioactive materials such as nuclear waste.

They only require basic bomb-making skills and access to small amounts of radioactive material.

Scott Farley, spokesman for the International Underwriting Association, admitted that individual insurers were totting up the potential costs of continuing to offer dirty bomb cover or protection against 'bio-terrorism' - where diseases such as anthrax or smallpox are spread by a bomb or other device.

But Farley said decisions have yet to be taken, adding that the industry has been acting in close partnership with customers, governments and authorities, including the European Commission, and would not withdraw cover overnight.

He said: "These clauses are being reviewed by the market. Since 9/11, aviation insurers have looked at these clauses to examine what kind of cover is on offer.

"There have not been any definite conclusions about what changes are going to be made.

"All this work is being done by our members in association with the airlines and the EU. It is not that changes are being made unilaterally."

An EU regulation that enters into force next Spring foresees the possibility of EU-wide government cooperation - and intervention - in the event of market failure. But Commission officials warned that the envisaged committee of national officials set up under regulation would not be able to respond to a total absence of cover.

"It would not work for a complete failure of the market," said one official. "We don't have a ready solution. If it comes, then we will have to have an emergency plan. We don't know yet what will happen: no one does. There are rumours. But we are still hopeful that the market will maintain cover," he added.

Gérard Borel, general counsel of the Airports Council International, said airports were desperate for a solution before they were confronted with a withdrawal of cover.

"This is a real problem for all airports - especially the private ones," he said.

If EU governments cannot help, the continent's aviation industry - already feeling the heat from massive post-9/11 insurance charges - would be put at yet another disadvantage vis-à-vis US rivals who gain from low-price state-funded third-party terrorist risk cover.

Article says that European airlines and airports fear they could be left exposed to huge financial risk as insurance companies threaten to remove cover for damage caused by radioactive 'dirty bombs'.