Aviation Insurance: Federal Insurance Program Needs Improvements to
Ensure Success (Letter Report, 07/15/94, GAO/RCED-94-151).

The government sometimes calls on commercial airlines to transport
troops and supplies when its own airlift capacity falls short. The
insurance the Federal Aviation Administration (FAA) issues, called
war-risk insurance, covers losses resulting from war, terrorism, or
other hostile acts. During the Persian Gulf war, the Aviation Insurance
Program helped fill the void left when commercial insurers hiked
premiums or canceled airlines' war-risk coverage. However, the program's
future success could be jeopardized because (1) available funds are
insufficient to pay for potential losses and (2) delays in claims
payments have adverse consequences for both the airlines and the
government. One way to deal with the problems of funding and the
timeliness of payments would be for Congress to provide the
Transportation Department with access to money to pay claims that
exceeded available funds. The program's success is also threatened by
the airlines' uncertainty about FAA's war-risk coverage and concerns
about perceived gaps in the coverage as compared with the coverage
provided by commercial policies. Weaknesses in the process used to issue
war-risk insurance could also delay the timely payment of claims. GAO
believes that FAA should require airlines registered for war-risk
insurance to routinely submit copies of their current commercial
war-risk policies and any subsequent changes as a stipulation for
receiving insurance under the Aviation Insurance Program. Finally,
Congress needs to clarify whether FAA must obtain a presidential
determination before issuing nonpremium insurance and extending the
policies for another 60 days.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-94-151
     TITLE:  Aviation Insurance: Federal Insurance Program Needs 
             Improvements to Ensure Success
      DATE:  07/15/94
   SUBJECT:  Insurance claims
             Insurance losses
             Property losses
             Air transportation operations
             Military airlift operations
             Freight transportation operations
             Strategic mobility forces
             Comparative analysis
             Insurance premiums
             Commercial aviation
IDENTIFIER:  FAA Aviation War Risk Insurance Program
             Persian Gulf War
             Aviation Insurance Revolving Fund
             Air Force Indemnification Program
             Somalia
             DOD Operation Restore Hope
             Defense Business Operations Fund
             
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