Terrorism clause change to coax insurers back

Aviation insurers will consider rejoining the market if a key liability clause is excluded, according to senior industry sources.

The clause is designed to limit the total of passenger and third party liabilities.

Used in current policies, the clause locks together both types of cover to prevent the sum of the two exceeding a specified limit.

But industry figures fear it could give lawyers a field day if a court ever had to decide between rival claims to insurers' funds.

In the event of a major terrorist attack the difficulty would be deciding which had the first, or greater, call - the third party losses or the passenger losses.

Aviation sources told Insurance Times underwriters could be coaxed back to the crucial market if the clause were removed or revised.

Time is running out before the current government-backed scheme expires at the end of March.

Unless commercial insurers return to writing the business, airlines could face being grounded as they did after the 11 September hijackings.

Plans under discussion are believed to include the possibility of granting airlines immunity from prosecution for third party liabilities.

The immunity would apply only if airlines had met specified safety and security standards.

It would remove the need for third party liability cover.