Extension to cover to be decided by individual countries

Governments in the European Union (EU) will work together to create a mutual pool to insure planes against terrorism attacks.

A senior insurance aviation expert said this could see the 15 EU governments providing reinsurance for terrorism risks.

Following the World Trade Centre tragedy, commercial insurers would not cover airline risks. National governments were forced to provide cover to prevent planes being grounded and the UK government set up the Troika scheme through Aon, Marsh and Willis.

Last week, the European Commission allowed the EU governments to continue to provide state aid against third party liability risks. Each head of state will decide individually whether to extend the cover for another two months.

The EU vice president for transport, Loyola De Palacio, noted the US was guaranteeing government aid until 19 May and, because of this, the insurance market would not find "its normal market conditions".

She said: "The Commission was ready to accept within existing conditions new state aid until 31 May."

An EU spokesman said all the ministers were willing to accept the extensions, although a couple said the schemes should end at the same time as the US. Others argued this should be the final extension.

The spokesman added: "The Commission said that it would make specific proposals in June and July to the European Council to establish a mutual."

But a senior aviation underwriter said the scheme would probably face delays.

"The difficulties are having to get all governments to agree final details of how it would work," he said.

"There are also political issues about who pays for what in the event of a claim and the percentage each sovereign state should pay."