A crisis which could have grounded flights worldwide was averted when the government stepped in with a multi-million pound rescue plan to insure British airlines.
Details have emerged of how the government is giving its backing to a new company, called Troika, which is providing vital stopgap insurance.
Commercial insurers withdrew most of their coverage for third-party non-passenger liability in the wake of the September 11 terrorist attacks in the US, reducing limits to $50m from a typical level of $750m.
Flights would have been grounded because aircraft owners, which lease them to airlines, insist on far higher cover.
A treasury spokesman said: “It became obvious last week that the insurance industry wasn't going to provide third-party liability from midnight on Monday September 24.
“For the next 30 days at least, we will provide the third-party liability cover over and above $50m up to the airlines' usual levels.
“We are the financial backer of Troika, in effect.”
For the first 30 days, airlines will pay no premium for the additional cover they need. The situation will then be reviewed. The government intends to then demand a commercial rate for its services, the spokesman said.
The cost of the scheme is likely to be small unless there is a claim. It covers all member airlines of the British Air Transport Association.
Longer term solutions are being investigated.
Troika is being sponsored by the three bro
