Ryanair 2016 Annual Report Download - page 82
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82
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 liability war
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 operated 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.
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 underwrites 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 aviation insurance 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 $16.1 million. In addition to
aviation insurance, AIL has underwritten most of the single trip travel insurance policies sold on Ryanair.com since
February 1, 2011.
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 suffe red
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 appropriate 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.