Exclusive: La Reunion leads Gallagher's $1 billion nuclear strike airline cancellation solution

By Michael Jones

May 14 - (The Insurer) - La Reunion Aerienne is the lead on the $1 billion liability solution launched by Gallagher to provide cover to airlines in the event of a hostile nuclear detonation, two senior market sources told The Insurer.

All airline insurance policies have a condition that terminates certain crucial war liability insurance coverages automatically in the event of a nuclear detonation incident, two separate aviation market sources said.

Gallagher said in a release on Monday that its solution could prevent airlines from having to ground their fleets immediately in the event of a detonation, which it said could cause passenger chaos and cost the industry hundreds of millions of dollars.

The broker said its solution provides $1 billion of the required liability cover subject to the prior agreement of a dedicated panel of insurers.

In the event of a nuclear detonation incident, Gallagher said the panel will convene within a set timeframe to assess risks, and then agree on when and where it is credible to instigate special cover.

Two senior aviation market sources said La Reunion Aerienne is the lead insurer on the panel. Gallagher confirmed La Reunion Aerienne's involvement to The Insurer.

The broker said more than 100 global airline operators have subscribed to its facility.

Standard automatic cancellation wordings were agreed when any kind of nuclear detonation was envisaged as an extremely significant, armageddon-type scenario. However, Gallagher said that the use of tactical nuclear weapons, which would affect limited areas, has become more likely with various capable powers globally.

In response to this, the aviation insurance market recently agreed to extend the automatic cancellation from taking effect virtually immediately to within a minimum of 48 hours, the release said.

Gallagher said that alternative options to its facility included waiting for the reinstatement cover, which it argued could take weeks or months to occur, or rely on a government indemnity or intervention.

The latter is subject to inconsistencies due to varying attitudes between countries, Gallagher said, while indemnities may be limited in scope and cover.

La Reunion Aerienne declined to comment.