“Dark Clouds” from the Russia-Ukraine conflict loom large over the aviation war market, was the message from speakers talking at the IATA Risk and Insurance Forum held in London.
Speakers at the forum discussed how an escalation in the conflict – nuclear or further military involvement - would mean a termination of current policies. Automatic cancellations of policies would be a worst-case scenario for insurers and airlines.
Furthermore, in the event of an escalation of the conflict and the subsequent grounding of global aircraft, there would be wide-ranging connected exposures on all war risks. In this scenario, aircraft would be grounded at airports across the globe, thereby increasing exposure.
However, it was the view of one speaker that the current war market is not fit for purpose in dealing with the new realities in today’s complex world.
It could be viewed, as one speaker described, as being a “market failure”, and there are grounds to view the current war market through two areas such as geopolitical and local risk.
Despite the complexity and concerns surrounding the war market, there are signs that the industry is trying to deal with the challenge, but there are complications in doing this.
While there is no lack of solutions presented within the industry, there is a lack of group agreement on a cohesive and collective answer. Yet resolving the issue is difficult because industry collaboration falls foul of competition regulation.
Ultimately, what is needed is Government support in acting as a backstop, to support airlines in having a “pre-agreed” indemnity policy before the event, built in close collaboration with government and their own legal teams.
Speakers at the forum called on industry participants, related associations and stakeholders to engage with their national governments and establish a framework, which better manages the fallout from future conflicts.