Commercial insurers haven't enough capacity for aviation

A permanent aviation pool must be established, the head of aviation power Global Aerospace Underwriting Managers (Gaum) has warned.

Gaum group chief executive Tony Medniuk was speaking at the International Underwriting Association (IUA) annual general meeting last week.

Medniuk said there was not enough capacity in the aviation market to allow the government to disregard the idea of a permanent pool arrangement.

Last week, the UK government extended its Troika aviation cover scheme, due to finish on 30 June, until the end of August.

However, it made the conditions for cover more stringent, raising the commercial element to £100m, saying that enough commercial cover was available.

Despite the troubles with aviation cover, the UK government has been careful not to become to closely involved.

Yet Medniuk said some kind of intervention must continue. "Airlines don't feel that commercial insurers alone can cover that level of damage," he said.

"The commercial market has the resources to cover the primary layer, but a pool is needed after that."

Medniuk said the level of damages that could arise from the use of a plane in an act of terrorism had still not been ascertained.

Meanwhile, this week Sweden cut its aviation terror guarantee, saying airline companies would have to make their own decision about how and where they find cover.

The EU is still considering setting up a Europe-wide mutual for aviation risks.

A number of insurers will carry the cost of the cargo lost in the plane crash over Germany on Monday night.

DHL's Boeing 757 cargo plane collided in mid-air with a Russian charter flight. The cargo plane was carrying a shipment of letters, packages and parcels from the Middle East, south-east Europe and Italy to DHL's headquarters in Brussels.

Every item in the cargo was insured by DHL to the value of $100, unless customers had requested higher cover.

A DHL spokeswoman said it had a number of insurers on its panel.