Ryanair 2009 Annual Report Download - page 64

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INSURANCE
Ryanair is exposed to potential catastrophic losses that may be incurred in the event of an aircraft
accident or terrorist incident. Any such accident or incident could involve costs related to the repair or
replacement of a damaged aircraft and its consequent temporary or permanent loss from service. In addition, an
accident or incident could result in significant legal claims against the Company from injured passengers and
others who experienced injury as a result of the accident or incident, including ground victims. Ryanair
maintains passenger liability insurance, employer liability insurance, aircraft insurance for aircraft loss or
damage, and other business insurance in amounts per occurrence consistent with industry standards. Ryanair
believes its insurance coverage is adequate, although not comprehensive. There can be no assurance that the
amount of such coverage will not need to be increased, that insurance premiums will not increase significantly
or that Ryanair will not be forced to bear substantial losses from accidents.
The cost of insurance coverage for certain third-party liabilities arising from “acts of war” or terrorism
increased dramatically as a result of the September 11, 2001 terrorist attacks. In the immediate aftermath,
aircraft hull war-liability indemnities for amounts above $50 million were, in the absence of any alternative
coverage, provided by the Irish Government at pre-September 11, 2001 levels of coverage on the basis of a per-
passenger surcharge. In March 2002, once such coverage was again commercially available, Ryanair arranged
coverage to replace that provided by the government indemnity. The replacement insurance coverage operates
on the basis of a per-passenger surcharge with an additional surcharge based on hull values. Ryanair’s insurers
have indicated that the scope of the Company’s current war-related insurance coverage may exclude certain
types of catastrophic incidents, which may result in the Company seeking alternative coverage. Ryanair to date
has passed increased insurance costs on to passengers by means of a special “insurance levy” on each ticket.
During the 2006 fiscal year, Ryanair established Aviation Insurance (IOM), Limited (“AIL”), a wholly
owned insurance company subsidiary, to provide the Company with self-insurance as part of its ongoing risk-
management strategy. AIL’s activities are currently limited to underwriting a portion of the Company’s aviation
insurance program, which covers not only the Company’s aircraft but also its liability to passengers and to third
parties. AIL reinsures virtually all of the risk it underwrites with recognized third parties in the aviation
reinsurance market, with the amount of AIL’s maximum aggregate exposure not currently subject to such
reinsurance agreements being equal to approximately $14.25 million.
Council Regulation (EC) No. 2027 / 97, as amended by Council Regulation (EC) No. 889 / 2002,
governs air carrier liability. This legislation provides for unlimited liability of an air carrier in the event of death
or bodily injuries suffered by passengers, implementing the Warsaw Convention of 1929 for the Unification of
Certain Rules Relating to Transportation by Air, as amended by the Montreal Convention of 1999. Ryanair has
extended its liability insurance to meet the requirements of the legislation.
See “Item 3. Key Information—Risk Factors— Risks Related to the Airline Industry—The Company
Faces the Risk of Loss and Liability” for information on the Company’s risks of loss and liability.