China's aviation authority promised to provide one month of extra
aviation insurance for Chinese airlines as their war-coverage
insurance expired Tuesday morning.
If
Chinese passenger planes are caught in acts of war or terrorism
during the period, the government will provide billions of US
dollars in extra financial support in compensation for injured
third-parties whose claims may exceed the 50 million covered by
private insurers, an official with the General Administration of
Civil Aviation of China (CAAC) told China Daily Tuesday in a
telephone interview.
The damage and suffering brought to airlines and passengers, the
first and second parties, will be covered by related insurance
companies.
Li
Hongyu with the Financial Department of CAAC said that the
administration adopted the measure in accordance with a policy
change of the international insurers.
International insurance companies cut the maximum of the
war-coverage insurance to US$50 million from the former US$1.25
billion at 7:59 Beijing Time Tuesday, fearing possible US attacks
against terrorists in Afghanistan may lead to more plane
accidents.
The terrorist plane crashes in New York and Washington on September
11 left many aviation insurance companies on the verge of
collapse.
Li
said that only with government insurance could Chinese airlines
continue their operation along international air routes after the
move.
"No domestic airlines or insurers have the ability to afford such
compensation if an accident happens,'' Li said.
Less than 10 airlines now have permission to operate international
flights, including Air China, China Eastern
Airlines and China Southern
Airlines. Nearly all of them buy war-coverage insurance from
foreign insurers.
Li
refused to explain why the Chinese government will only provide a
one-month guarantee for the airlines, while insiders with the
administration suggested CAAC may take the month to map out
concrete reinsurance plans for the future.
The insurance shake-up did not affect the life insurance market of
the aviation industry. Life insurance premiums to US cities by air
still remain the same.
Li
Bing, an official with Ping An Insurance Company of China, which
provides insurance service for Hainan Airlines, said the life
insurance premium will not see a sharp increase in the near
future.
He
said the change of international insurance policies will ring the
alarm bell for domestic airlines.
"As along as there are no such accidents happening, airlines will
not suffer more losses,'' Li said.
Sources with Air China and China Southern Airlines confirmed
Tuesday that they have stopped international flights to Middle-East
regions with the threat of possible US attacks on terrorists in
Afghanistan.
The Hong Kong Special Administrative Region government will also
provide guarantees for Hong Kong-based airlines following the
change of insurance policies.
The Legislative Council and its Finance Committee on Monday
approved the government's proposal to provide third-party
indemnities out of war, or terrorism or other perils, Financial
Secretary Antony Leung told the media.
The council agreed to one month's backing, to be extended if
necessary, pending new contracts with insurers.
The bailout will help two Hong Kong-based passenger carriers,
Cathay Pacific Airways and Hong Kong Dragonair, and one cargo
carrier, AHK Air Hong Kong to continue flying.
(China Daily
09/26/2001)