Abstract
The object of this book has been to explore the central issues underlying the perennial problem of providing the air transport industry with adequate and sustainable insurance coverage for aviation war and terrorism risks. We began by describing the manner in which the conventional insurance industry has been used as the primary risk management tool for addressing the massive economic repercussions of such risks upon the air transport industry. We also made an effort to identify the fundamental reasons why conventional insurance markets covering such large catastrophic risks “fail” in the period immediately following the occurrence of an extreme insured event. We then analyzed various complementary solutions that have been advanced for the purpose of enhancing the ability of the conventional insurance industry to provide coverage for such risks as well as alternative solutions advanced and even implemented as substitutes for conventional insurance coverage. Below, we conclude by setting out some of the major findings and conclusions that were made during this research.
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Notes
- 1.
Andersen (2005) p. 179.
- 2.
Mutenga and Staikouras (2007) p. 228.
- 3.
Andersen (2005) p. 179.
- 4.
Mutenga and Staikouras (2007) p. 228.
- 5.
Idem.
- 6.
Idem. According to proponents of this theory, “[r]etention and reinsurance-based techniques do not go far enough in satisfying the risk transfer requirements of cash flows occupying the upper tails of the loss distribution. Losses on the tail of the loss distribution are best financed by capital market-based instruments. These instruments are bought with the sole purpose of alleviating the strain on capital and/or enhancing its role when depleted after a catastrophic event. They are efficient at financing the upper part of the loss distribution because vast amounts of capital are easily accessible, making it cheaper than accumulated reinsurance and retention-based equity. On the other hand, retention and reinsurance-based techniques are efficient in financing risks associated with higher probability of occurrence. Retention-based techniques are efficient at financing risk using the all-purpose equity supplied by shareholders and accumulated from retained earnings. Reinsurance-based instruments are used to provide protection for cash flows occupying the unexpected loss region – up to the tails of the loss distribution”.
- 7.
Idem., pp. 228–229.
- 8.
ICAO Doc. 9920 (2009), art. 40(1).
References
Andersen TJ (2005) International financing solutions to terrorism risk exposures. In: Policy issues in insurance no. 9 – terrorism risk insurance in OECD countries. Organisation for Economic Cooperation and Development (OECD), Paris, pp 149–188
ICAO Doc. 9920 (2009) Convention on Compensation for Damage Caused to Third Parties, Resulting from Acts of Unlawful Interference involving Aircraft
Mutenga S, Staikouras SK (2007) The theory of catastrophe risk financing: a look at the instruments that might transform the insurance industry. Geneva Papers (Issues & Practice) 32(2):222–245
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Nyampong, Y.O.M. (2013). Findings and Conclusions: Towards Sustainable Insurance of Aviation War and Terrorism Risks. In: Insuring the Air Transport Industry Against Aviation War and Terrorism Risks and Allied Perils. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-32433-8_8
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DOI: https://doi.org/10.1007/978-3-642-32433-8_8
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