Peruvian airline Aero Continente was grounded last week over a dispute with its insurance company.
It is understood that UK insurer Global Aerospace refused to renew the policy when US authorities blacklisted Aero Continente's founder Fernando Zevallos under the Foreign Narcotics Kingpin Determination Act. The insurance expired on the 10 July.
Flights to the Copa America soccer tournament were disrupted. The Peruvian soccer team, for which Aero Continente was the official carrier, managed to switch flights. However, other passengers were less lucky - about 4,000 were stranded in Peru.
Efforts were made to get the airline off the ground with temporary cover. But Peru's Transport Ministry suspended it.
In a radio broadcast, transport minister Jose Ortiz said: "They have presented partial insurance that doesn't cover all eventualities and the law doesn't permit this."
Lloyd's broker Houlder Insurance Services joint managing director Bob Beattie confirmed it was in discussions to place Aero Continente's risk, but said: "We are unaware of providing temporary cover on the day. We are currently in discussions with underwriters. There is nothing firm at the moment, as Aero Continente is undergoing a management buy-out."
Global Aerospace and broker Willis, who previously placed the insurance at Lloyd's, refused to comment.
