[Congressional Record (Bound Edition), Volume 152 (2006), Part 5]
[Extensions of Remarks]
[Page 6250]
[From the U.S. Government Publishing Office, www.gpo.gov]




      INTRODUCTION OF FAA WAR RISK INSURANCE EXTENSION LEGISLATION

                                 ______
                                 

                           HON. JOHN L. MICA

                               of florida

                    in the house of representatives

                       Wednesday, April 26, 2006

  Mr. MICA. Mr. Speaker, I am introducing legislation today that would 
extend the Federal Aviation Administration's war risk insurance program 
for U.S. commercial air carriers. Ever since 9/11, the commercial 
insurance market has been unwilling to provide the war-risk insurance 
that our nation's airlines need. That continues today and there is no 
foreseeable end to this situation. If airlines don't have that 
insurance coverage, as a practical matter they won't be able to fly. 
Because of this situation, Congress must extend the program to provide 
U.S. airlines the war-risk insurance that they need. The accompanying 
legislation would do that for five years.
  As many of us remember, immediately after 9/11 commercial insurers in 
lockstep cancelled the airlines' war-risk policies. That withdrawal of 
essential insurance coverage caused a crisis that Congress on September 
21, 2001 resolved by granting the Federal Aviation Administration the 
authority to issue war-risk insurance policies to U.S. airlines. The 
FAA today provides war-risk insurance to some 70 U.S. airlines. The FAA 
program has been generating roughly $150 million annually in premium 
payments to the treasury and we can expect about the same amount of 
payments in 2006. That is 6 or 7 times what the U.S. airline industry 
paid for that coverage before 9/11.
  Congress has repeatedly extended the FAA's program since 2002 because 
we have recognized that war-risk insurance for the airlines is 
indispensable. Airlines won't fly without that coverage because they 
cannot bear the financial risk of a catastrophic act of terrorism 
against them. Expressed another way, no one wants large aircraft 
operating in the United States that do not have adequate insurance 
coverage.
  I wish that I could report that the commercial market for aviation 
war-risk insurance has returned to its pre-9/11 condition. 
Unfortunately, it has not; the marketplace is failing to cover the 
terrorism risks to which airlines are exposed. Indeed, the situation 
has worsened. Premium costs and coverage terms in the commercial market 
have not been and are not today reasonable.
  Of immediate concern is how the marketplace is treating coverage of 
aviation losses attributable to weapons of mass destruction. The FAA's 
insurance policy quite properly covers this risk. But if U.S. airlines 
were required to rely on the commercial market for war-risk insurance, 
today they effectively could not get WMD coverage for their aircraft 
(in insurance terms, their ``hulls''.) More ominously, it appears that 
this year the commercial market will stop providing most third-party 
WMD coverage. This means that if a WMD incident were to occur on an 
aircraft in flight, commercial insurance would not cover the death and 
injury of persons on the ground, or damage to property on the ground.
  Neither airlines nor their employees, who have borne so much of the 
financial adversity that the U.S. airline industry has suffered since 
9/11, can afford such an increase in premiums. Between 2001 and 2005, 
U.S. airlines had net losses of more than $40 billion. A staggering 
135,000 jobs have been lost in the airline industry since 2001. The 
compensation of those who remain in the industry in many instances has 
been slashed. Current projections are that the airlines will lose 
another $2 billion in 2006. With stubbornly high oil prices, now $67 
per barrel, that projection may turn out to be optimistic.
  If Congress does not act, the already ailing U.S. airlines will be 
forced into a commercial market that provides war-risk insurance that 
is extraordinarily expensive; does not provide anywhere near the 
coverage that is necessary; and continues to write war-risk insurance 
policies with seven-day cancellation clauses, the same clauses that 
caused so much turmoil right after 9/11.
  We must therefore renew the FAA's war-risk insurance program. And, 
realistically, we must do so for an extended period. We have had one-
year renewals of the program since 2002. We would all be better served 
if the extension were lengthier, which is why the accompanying 
legislation would extend the program for 5 years. I am pleased to 
introduce this needed legislation today.

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