Tuesday, January 21, 2003

Airport rejects adding coverage

Insurance costs battering budget

By James Pilcher
The Cincinnati Enquirer

HEBRON - Insurance rates are rising in all aspects of business, but nothing compares to those in the aviation industry. The Cincinnati/Northern Kentucky International Airport is paying almost $1 million more in premiums this year than last because of changes in how terrorism insurance is handled.

The impact on what the airport can charge airlines to use runways and gates is small, meaning there is little effect on fares. But it has had a major impact on the local airport's budget, which ran its first deficit ever last year, and on airports and airlines nationwide.

The increases come at a time when airports nationally face shrinking revenue because of fewer passengers and fewer and lighter planes using the airport. The airport charges airlines by the pound for use of the runways.

Because of the financial straits of the airport and the uncertainty surrounding terrorism insurance, the airport board's finance committee Monday decided not to pay for more coverage.

"In our analysis, the new policies would be more restrictive and right now for us, it's cost compared to risk,'' airport finance director Sheila Hammons said. "Security costs and then insurance have been the two biggest costs that have grown in the last two years.''

Because of a law passed in late November, insurance companies are now required to offer separate terrorism insurance that is guaranteed by the federal government. But those policies come with major strings; other policies not covered by the law are available.

The airport already has $100 million in separate terrorism insurance for its property and $50 million for general terrorism liability. That's in addition to the $600 million general property insurance the airport carries and $300 million in general liability insurance.

In 2002, the airport paid just over $1 million for all insurance, but expects to pay almost $1.9 million this year. The new policies that were rejected Monday would have cost up to $1.4 million annually for $300 million worth of terrorism property insurance, and $1.14 million for terrorism liability insurance.

The increase has been even more drastic for airlines, but experts say those businesses can pass the costs directly on to passengers.

Ms. Hammons said the insurance increases won't affect construction of a new runway. She said the airport administration was comfortable with the amount of terrorism insurance in place.

E-mail jpilcher@enquirer.com

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