Aviation war risk insurance provides coverage for hostile acts of violence against airlines, such as terrorism, hijackings, and sabotage. Airlines generally cannot operate without war risk insurance, as aircraft loan and lease agreements typically require airlines to obtain and maintain such insurance. Additionally, some foreign countries require that airlines have war risk insurance as a condition to operate in their airspace or at their airports. Aside from some degree of self- insurance, airlines generally rely on the private insurance markets to provide catastrophic coverage (see Text Box ). Following the 9/11 terrorist attacks, airlines were affected by a worldwide cancellation of third-party liability war risk coverage in the commercial market and significant increases in the costs of other war risk insurance. The U.S. government stepped in and expanded the federal Aviation War Risk Insurance Program to guarantee that U.S. air carriers could receive insurance coverage that was not being supplied by the commercial insurance market. The commercial insurance market has since stabilized, and a number of air carriers are again purchasing war risk coverage from private insurers. According to a 2012 European Union study, private coverage is readily available for loss or damage to passengers and aircraft hulls in the event of a terrorist attack, but insurers have limited the level of coverage available for third-party damage caused by war or terrorism. Liability and hull risk are typically covered in a single policy with the same insurers covering both. The study found airline insurance to be a relatively small percentage of the total operating costs of airlines, citing an industry estimate that all airlines combined paid approximately $2.3 billion for basic airline insurance in 2011. This translates into about $60 per flight or $0.80 cents per passenger. The price of insurance varies significantly from airline to airline, depending on the location of the airline, its size, fleet age and maintenance, safety record, the geographical spread of its network, and the level of deductible. The study concluded that while the capacity of the private market for aviation risk insurance seemed adequate, this could change in the case of a major terrorist incident. According to the Federal Aviation Administration (FAA), commercial insurers currently provide the vast majority of the world's airlines with war risk coverage and are willing to provide coverage to U.S. air carriers as well. The market for aviation coverage outside of war risk has been relatively soft over the past few years, with insurance brokers reporting ample availability and lower prices than in earlier years. A series of airliner losses in 2014, however, may lead to increases in aviation insurance premiums. These losses include the disappearance of Malaysia Airlines flight 370 with 239 people on board over the Indian Ocean in March, followed by the shooting down of Malaysia Airlines flight 17 over eastern Ukraine in July, which killed 298 people on board. Further unsettling the aviation risk environment is damage to aircraft in recent attacks on airports, including Taliban attacks on Karachi airport in Pakistan in June 2014 and fighting at Tripoli airport in Libya. Some aviation insurers have reportedly estimated that the industry could see insurance premiums rise as much as 50% and that premiums for war risk insurance could treble, the biggest jump since 9/11. However, some insurance company officials have said that it is "premature and speculative to talk about the level of price rises," since there has not been renewal for major carriers in the war risk insurance market. The insurance losses in 2014 may also lead to higher premiums for "all-risk" policies. It remains unclear how the commercial market is going to react and whether private coverage might become prohibitively expensive or even unavailable. The unavailability of private coverage, should it occur, would be especially consequential for U.S. air carriers flying to destinations within the European Union. Since April 30, 2005, EU Regulation 785/2004 (as amended by Regulation 285/2010), has required that all air carriers and aircraft operators flying within, into, out of, or over EU territory be insured with regard to their aviation-specific liabilities including war- and terrorism-related risks. For overflights (without a take-off or landing in the EU) by non-EU air carriers or operators using aircraft registered outside the EU, the minimum insurance requirements for passengers, baggage and cargo do not apply. But the overflights must comply with the requirements for insurance against third-party liability. Although the governments of many non-EU countries, such as the United States, may not require air carriers to have war risk insurance, EU Regulation 785/2004, in effect, has made such insurance mandatory for non-EU carriers operating to and from the EU. Key provisions of the current regulation are listed in Appendix A . The federal government made war risk insurance available to the merchant fleet in World War I and World War II. No aviation war risk insurance was provided during these wars because overseas commercial air operations were limited in number and were taken over by the U.S. government. Prior to 1951, aviation war risk insurance was commercially available but subject to 48-hour cancellation clauses, which proved particularly worrisome for operators participating in the Korean War airlift. A 1951 law to amend the Civil Aeronautics Act of 1938 (P. L. 82-47) included a title giving the Secretary of Commerce authority to provide war risk insurance when doing so was determined necessary in the interest of air commerce. Coverage could be extended to both U.S.- and foreign-flag aircraft deemed to be operating in the interest of the national defense or the national economy of the United States. Coverage could include aircraft, cargo, personal effects and baggage of crew and other employees carried aboard the aircraft, and statutory or contractual obligations or other liabilities. Premium insurance and reinsurance rates could be set by the Secretary of Commerce within loosely defined bounds based on analysis of available coverage and rates in the private insurance and reinsurance markets. Under the act, a revolving fund was established within the Treasury, funded through premiums, salvage, and other recoveries from loss. Any returned premiums, losses, settlements, judgments, or other liabilities covered under the insurance program would be disbursed by the Treasury from these funds. The federally provided war risk insurance could be underwritten by any company authorized to offer aviation insurance in any state. Disagreements regarding claims against the aviation war risk insurance fund could be adjudicated in federal district court. The program was continued under the Federal Aviation Act of 1958 (P. L. 85-726) and retained within the Department of Commerce. In 1966, under the newly created Department of Transportation, responsibility for the program was delegated to FAA. Many terrorism experts point to the July 23, 1968, hijacking of an El Al Boeing 707 in Rome, Italy, by members of the Popular Front for the Liberation of Palestine (PFLP) as the beginning of an era of international terrorism. The following year, in August 1969, a Trans World Airlines flight from Rome to Athens, Greece, was hijacked, also by PFLP members, and diverted to Damascus, Syria, where the hijackers blew up the nose section of the aircraft and held two Israeli passengers hostage for more than 40 days. Emboldened by these acts, PFLP hijackers attempted to commandeer four airliners on September 6, 1970, successfully hijacking three. The attempted hijacking of the fourth, an El Al Boeing 707, was thwarted by an armed Israeli guard on board. The events came to be collectively known as the Dawson's Field hijackings because two of the three successfully hijacked aircraft were taken to Dawson's Field, a remote landing strip in Jordan, where they were burned and destroyed after the passengers had been taken to another location. The fate of the third aircraft hijacked on September 6, 1970, a Pan Am 747, is of particular relevance in discussing policies and legal considerations of insurance coverage for terrorist acts. When the flight crew informed hijackers of their concerns over landing the large jet at Dawson's Field, the hijackers instead ordered the airplane to fly to Beirut, Lebanon, and then to Cairo, Egypt. After landing in Cairo, one of the hijackers detonated an explosive that ignited a fire. Although all on board managed to escape, the jet was completely destroyed . The aircraft was being operated under a lease agreement and insured under an "all risk" policy as well as war risk policies that were split between FAA and commercial insurers, with FAA reportedly assuming about 40% of the war risk . The event rattled the commercial insurance industry, which already had reservations about insuring the recently introduced Boeing 747s, which were larger, more costly, and carried significantly more passengers than other airliners. Growing concerns over terrorist hijackings prompted federal action to maintain war risk insurance coverage along routes in the Middle East. Following the Dawson Field hijackings, FAA expanded federal aviation war risk insurance coverage after determining that it was no longer available at reasonable rates from commercial insurers. The government reportedly set the rate at 20 cents per $100 of insurance, twice the price charged for commercial insurance prior to the hijackings, but significantly less than what the private market likely would have charged following the hijackings. The new insurance was offered on a limited basis under the existing Aviation War Risk Insurance Program as an emergency response to the ongoing Middle East crisis. The need for a long-term federal role in providing insurance to cover hijacking and terrorist risks was mitigated by a landmark 1973 federal district court decision. The court ruled that the claim for the Pan Am 747 destroyed by the hijackers in Cairo, Egypt was covered under the airline's standard "all risk" policy, not under its war risk policies. The court defined "act of war" as an operation intended to gain a military advantage. The decision was upheld by the U.S. Court of Appeals, which narrowed the district court's definition of war to specify that combatants must have significant attributes of sovereignty.