Garuda says all flights are fully insured
Garuda says all flights are fully insured
Tantri Yuliandini, The Jakarta Post, Jakarta
National flag carrier Garuda Indonesia has secured coverage
for its third-party war and terrorism liability insurance up to a
maximum of US$1 billion without government support, a senior
executive said.
Garuda's director of finance Emirsyah Satar said on Wednesday
that the company had moved to cover the insurance with agencies
in London immediately after the government declined to underwrite
the airline.
"It is, of course, up to the shareholder (the government) to
make that decision," he told reporters on the sidelines of a
ceremony marking a collaborative venture between Garuda and PT
Bank Central Asia (BCA).
The national airline had earlier asked for government support
following the shortfall in its insurance coverage.
Insurance companies around the world cut back airline
liability coverage for injury and damage to persons and property
on the ground resulting from terrorism, hijackings, and other war
risks immediately after last month's terrorist attacks on the
U.S.
The companies limited their coverage to a maximum of $50
million instead of the usual maximum of $2 billion immediately
after the attacks, causing many airlines around the world to
appeal to their respective governments for additional guarantees.
Without adequate liability coverage, the aircraft would be
banned from flying both by the lessor of the aircraft and the
designated airports.
The government, however, said on Tuesday that it would not
guarantee the shortfall due to its limited financial capabilities
and the fact that adequate coverage on the insurance market had
become available again.
Emirsyah admitted that Lloyds of London were once again
providing insurance coverage of up to $1 billion, whereas there
had been none available immediately after the attacks.
"Last week, there was no coverage for $1 billion available on
the market in London. But there is now, so we've gone back to the
market," he said, adding that Garuda's insurance broker was EON
London.
However, the higher coverage meant higher premiums, meaning
that the extra costs would be added to the price of airline
tickets, Emirsyah said.
But he added that Garuda had yet to decide on whether to
impose surcharges on its international or domestic passengers.
Global insurers had raised premiums per passenger for third-
party war and terrorism insurance to $1.25 for coverage worth $50
million. For coverage up to $150 million, an additional 35 U.S.
cents was added to the premium, and another $1.50 for coverage up
to $1 billion.
Therefore, a surcharge of approximately $3.10 per passenger
would be needed to cover the insurance premium.
Emirsyah said that Garuda needed to pay additional premiums of
between $20 million and $25 million per year for liability
coverage of up to $1 billion, besides having to pay about $10
million a year for hull liability. The premiums were paid in
quarterly installments, Emirsyah said.
He said that it was not yet certain when the airline would
start imposing the surcharges.