U.S. Carriers to Create Insurer for Terrorism

U.S. airlines plan to create a company to insure themselves against terrorism and acts of war at premiums about half the rate private insurers have been charging since the Sept. 11 attacks.

AMR Corp.’s American Airlines Inc., UAL Corp.’s United Airlines and other members of the Air Transport Assn., a trade group, are forming the company.

The new insurer, Equitime, will offer airlines liability coverage of as much as $1.5 billion an occurrence. Coverage will cost about 50 cents to 70 cents per passenger, compared with the $1.33 they now pay. Insurance available in the private market requires airlines to pay premiums equal to the potential loss they could absorb.

“Pre 9/11, U.S. airlines were paying a combined $15 million to $20 million for war risk coverage, and today we’re paying a combined $930 million,” said Chris Duncan, risk manager at Delta Air Lines Inc. and chairman of the ATA’s insurance group. “That’s not insurance.”