Session: State Capitol, Room 30 Juneau, AK 99801-1182 Phone: (907) 465-3873 Fax: (907) 465-3922 Interim: PO Box 1441 Wrangell, AK 99929-1441 Phone: (907) 874-2318 Fax: (907) 874-3470 50 Front Street, Suite 203 Ketchikan, AK 99901 Phone: (907) 225-8088 Fax: (907) 225-0713

Sponsor Statement for SB 191
Joint Aviation Insurance Arrangements

An Act relating to insurance pooling by members of an airline employers association.

SB 191 would allow Alaska's air carriers to pool for property/casualty insurance. This is not a new concept. Since 1988, the pooling concept has been working effectively for the majority of Alaska's local governments and school districts, and has reduced insurance costs and increased loss control and safety.

Transportation is a key component of a healthy economy. Nowhere in the nation do people rely as heavily on commercial air carriers as we do in Alaska. Many Alaskans tasted life without air service when our airspace was closed in the aftermath of the September 11th terrorist attacks. Medical emergencies, stranded hunters and grocery shipments were all put on hold until special arrangements could be made allowing planes and helicopters to occupy the closed air space. Alaskans depend heavily on affordable air service for our very existence.

The effects of the September 11th attacks threaten the viability of many of Alaska's air carriers as aviation insurance rates have risen even further than previously predicted. Although the aviation insurance market has been hardening for many years, the cost of insurance has reached a crisis point since last fall, increasing 20 to 300 percent, depending on a company's claims. Many insurance companies have left the Alaska market, making the purchase of aviation insurance even more difficult. Increased insurance costs mean higher costs of transportation for all goods and services in the majority of Alaska's communities.

SB 191 permits air carriers to group together to self-insure, purchasing reinsurance over a large self-insured retention. With this large 'deductible", air carriers share a financial stake in each other's claims. This motivates the industry to police itself, with more focus on loss prevention, safety, and training. Pools produce not only cost relief, but also increased passenger and pilot safety.

Patterned after the very successful statute which allows cities, boroughs, school districts and REAA's to pool, this bill imposes stricter financial requirements on a joint aviation insurance arrangement to further protect Alaskans and ensure the financial strength of the pool. SB 191 is a necessary tool for keeping Alaska's transportation network safe and viable while positively affecting the economy.

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