Eruption Prompts Allianz to Provide Volcano Cover

Posted on May 30, 2011 by Sergio Ulloa (G+)

Air travelers worldwide were relieved this past week by the news that no further disruptions to air traffic control would be expected from Iceland's latest volcanic eruption. However, with the memories of Eyjafjallajokull's eruption last year and the mass delays it caused fresh in people's minds, Allianz has announced it will roll out business cover for volcano-related disruptions in the near future. Iceland is home to many active volcanic mountains. On May 21st, Grimsvotn, Iceland's most active volcano, started erupting and throwing large quantities of ash into the sky off the southeast coast of the country. This has been Grimsvotn's fifth eruption since 1993. Fearing that ash clouds would soon migrate to the continent and impair pilot visibility and flight equipment, European aviation authorities initially forced airport closures and hundreds of flight cancellations in Britain, Germany and several other countries in northwestern Europe. However, ash production from the volcano declined sharply and the following Thursday, Brussels-based air traffic agency Eurocontrol reported that no further disruptions to air traffic would be expected in Europe as a result of volcanic activity. Brian Flynn, head of network operations for Eurocontrol, confirmed that the ash cloud created from Grimsvotn was relatively minor and "as a result, there are no areas of high concentrations predicted or observed over Europe today," he said, adding "There are no flight restrictions anywhere." Some ash buildup was still projected to linger over a few parts of northern Scandinavia and Russia on Thursday before eventually dispersing. Other clouds would drift between Iceland and Greenland. But Flynn assured reporters that the remaining ash plumes would not disrupt air traffic. "Any significant ash concentrations are far out over the sea, at very low altitudes and well away from the air routes or airports," he said. "The expectation for the next couple of days is that there will be no disturbances to air traffic whatsoever." The response to Grimsvotn has been a marked contrast to the events surrounding another Icelandic volcano that erupted last year. On April 14 2010, European aviation authorities reacted to the eruption at Iceland's Eyjafjallajokul volcano, and ensuing ash pollution, by closing most sections of the continent's airspace for five straight days. As a result, over 100,000 flights were grounded, stranding an estimated 10 million travelers worldwide. According to the International Air Transport Association, the total cost of the turmoil on both international airlines, insurers and economies surpassed US$1.7 billion. While Grimsvotn led to the cancellation of some 500 flights, the scale of the disruption this year has been minuscule compared to 2010. European airlines, air traffic controllers, and governments appear to have learned some valuable lessons from the chaos surrounding Eyjafjallajokull last year. Some airline executives have argued the flight bans this year have in fact been a massive overreaction by now overly-worried safety regulators. Typically, insurance companies have not covered claims related to distant volcano eruptions and the effects their traveling remnants could have on a policyholder's assets, as property damage would not be the cause of the claim. In response to these recent tumultuous volcano-related delays however, Allianz SE, Europe's largest insurer, is planning to now provide coverage to businesses for disruption to transport and logistics that has been specifically caused by volcanic ash or snow. Andreas Shell, head of energy, property and marine claims for Allianz's industrial insurance unit, explained in a recent interview that the demand for such a product is readily apparent. "Customers are asking us to help them with coverage that also includes business interruption when volcanic ash or snow brings traffic to an extended halt and as a result affects their supply chains," he said. Mr. Shell further detailed what services Allianz would be looking to provide. "We will offer coverage for business interruption damages from events such as volcanic eruptions and snow to customers such as airports and companies dependent on just-in-time deliveries. What's currently on the market only covers part of the risks that customers want to have addressed." Allianz expect to have volcanic ash and snow coverage policies available by 2012. Those that have been inconvenienced and missed a flight due to Grimsvotn should have travel insurance options available. If you have purchased travel insurance that covers delays or cancellations due to volcanic ash before the current situation unfolded you will be covered. Make sure to check your policy wording, however as different insurers have different interpretations. After last year's events, some travel insurers have introduced separate or 'bolt-on' cover for volcanic ash delays and cancellations, which means that customers traveling on a basic policy under the same insurer may not be covered for the Grimsvotn eruption. Insurance Company Mentioned Allianz Allianz Group is one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.