No Cancellations on Gulf Related Coverage – Yet, But Insurers Warn of Surcharges

March 21, 2003

Despite the onset of the long anticipated war with Iraq, there have as yet been no outright cancellations of coverage relating to the Persian Gulf Region. Many insurance companies, however, have warned that they will impose surcharges for airlines and cargo carriers operating in the region.

According to a report from Reuters News Agency marine underwriters at Lloyds have placed “modest” surcharges on gulf cargo vessels. “We have changed some of our rates but not very dramatically and they are generally just in the northern end of the Gulf,” the article quoted Rupert Atkin, Chairman of the London War Committee. He indicated that rates were being reviewed “on a case by case basis.”

The rate increases so far have been in a range between .0125 percent to .06 percent depending on the vessels destination and cargo.

At present almost all airlines have suspended flights to the Middle East, but when they resume there will be some substantial surcharges. Some brokers have warned of increases of as much as 10 times the applicable rates on a “per flight” basis. U.S. carriers are largely unaffected, however, as they are still for the most part covered by the federal insurance program put in place following Sept. 11 and new provisions in the Homeland Security Act.

Insurers have given notice to the airlines that they will have to be notified of any flights to the affected regions. Coverage will then be either granted – at agreed rates – or denied entirely. The countries most immediately affected are Iraq, Kuwait and Israel, but the strictures apply to Jordan, Syria, Saudi Arabia, the Gulf States and eastern Turkey as well.

American International Group, one of the world’s biggest airline insurers, indicated that so far no coverage had been suspended, but when flights to the region resume it will institute a “per flight charge” of an as yet undetermined amount.

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