Terror premiums bring fear of ruin

TONY Slater does not have a company in the World Trade Centre. Nor does he run an airline. He doesn't even have a travel firm. But the attacks on New York's twin towers in September started a train of events that have left him close to ruin.

Slater runs an aircraft-cleaning business in Dublin. But his tiny company, which earns as little as £22.50 for a 30-minute turnround clean on a Boeing 737, has been hit by a fourfold increase in his insurance premiums. They have soared from £12,000 a year to £46,200. And the bill is likely to rocket £14,000 higher still when the Government stops providing emergency cover.

What is worse for Slater is that his insurer, the giant AIG, is demanding a year's premium in a single payment. And Slater's policy said - until he challenged the clause - that he would not be entitled to a refund, even if he was forced out of business. 'I'm only turning over about £200,000 a year,' said Slater, 'so I've got to work the first four months of the year simply to pay for insurance.' In a further blow, the £80m cover his premium bought him in the past has been halved.

Ground handling companies at airports throughout the British Isles face similar increases in terror insurance - a risk that until 11 September was thrown in free with their policies.

Since that day, when commercial insurers essentially withdrew terror cover, governments have been providing $2bn (£1.4bn) of cover with the airlines shouldering the first $50m of risk. Talks are under way, however, to replace governments' involvement with a 'mutual' insurance company operated by the airlines and funded by a levy on ticket sales. Experts point out that any company that operates 'airside' - in direct contact with aircraft in restricted airport areas - could be held liable if it was found to have allowed a terrorist or a bomb on to a plane.

But the move means that the insurance industry is effectively charging several times over for one risk.

AIG declined to comment, but the insurer told Slater that airport authorities insist that ground handling firms have terrorism cover. 'I don't think I'll be able to continue,' Slater said after a meeting in London with AIG and his insurance broker, Aon. 'I face a simple choice. Either I put up my charges, and that will have a knock-on effect on me and the airlines, who will put up their ticket prices. Or I keep my prices at the current level, and within six months it simply won't be worth staying in business. My insurer and broker have tried to be helpful, but this is a con and a cartel and I'm being priced out.'