Air Canada 2013 Annual Report Download - page 76

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2013 Air Canada Annual Report
76
Availability of Insurance Coverage and Increased Insurance Costs
The aviation insurance industry has been continually re-evaluating the terrorism risks that it covers, and this activity may
adversely affect some of Air Canada’s existing insurance carriers or Air Canada’s ability to obtain future insurance coverage. To
the extent that Air Canada’s existing insurance carriers are unable or unwilling to provide it with insurance coverage, and in
the absence of measures by the Government of Canada to provide the required coverage, Air Canada’s insurance costs may
increase further and may result in Air Canada being in breach of regulatory requirements or contractual arrangements
requiring that specific insurance be maintained, which may have a material adverse effect on Air Canada, its business, results
from operations and financial condition.
Third Party War Risk Insurance
There is a risk that the Government of Canada may not continue to provide an indemnity for third party war risk liability
coverage, which it is currently providing to Air Canada and certain other carriers in Canada until December 31, 2015. In the
event that the Government of Canada does not continue to provide such indemnity or amends such indemnity, Air Canada
and other industry participants would have to turn to the commercial insurance market to seek such coverage. Air Canada
estimates that such coverage would cost Air Canada approximately US$2.5 million per year. Alternative solutions, such as
those envisioned by the ICAO and the International Air Transport Association (“IATA”), have not developed as planned, due to
actions taken by other countries and the recent availability of supplemental insurance products. ICAO and IATA are continuing
their efforts in this area; however, the achievement of a global solution is not likely in the immediate or near future. The U.S.
federal government has set up its own facility to provide war risk coverage to U.S. carriers, thus removing itself as a key
component of any global plan.