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Aviation war risk insurance and its impacts on US passenger aviation

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Author(s): Paul J. Freitas

Journal: Journal of Transport Literature
ISSN 2238-1031

Volume: 7;
Issue: 2;
Start page: 268;
Date: 2013;
Original page

Keywords: aviation insurance | airlines | jets | wars

ABSTRACT
In the aftermath of the September 11 attacks, the United States government became a supplier of aviation war risk (AWR) insurance for airliners, as well as a reinsurer for commercial insurance. Here we quantitatively examine the consequences of these offerings. The AWR offering is primarily needed for widebody and jumbo jets; smaller aircraft like the Embraer 195 are far less capable of creating damage in excess of the $50 million AWR deductible. Widebody and jumbo jets are also the only aircraft capable of creating long-term government liability through its commercial reinsurance. The US government's assumed risk through its insurance involvement can reach into the hundreds of billions of dollars. This risk level can create a perceived financial incentive for government to force airline passengers through invasive and dangerous search procedures. Thus, governmental insurance offerings can create a conflict of interest that infringes air passengers' civil liberties.
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