Since 1975, about 5,400 flights have been covered. Appendix I summarizes the major attributes of the program. National Defense Authorization Act for Fiscal Year 1997 Addressed the Majority of Problems With Insurance Program Funding

In 1994, we reported that the Fund’s balance was insufficient to pay many potential claims and that delays in the payment of claims could cause a financial hardship for affected airlines. 104-201) has addressed these problems for DOD-sponsored flights. Because the FAA would have needed to seek supplemental funding to pay any claims that exceeded the Fund’s balance, airline officials had expressed concern that untimely reimbursements could cause severe financial hardships and possible bankruptcy. Further Changes Are Needed in the Aviation Insurance Program

We have two remaining concerns about the program. The first is making sure that the program has sufficient funds available to pay potential insurance claims for non-Defense-related flights in a timely manner. Not counting the liability associated with the loss of a flight, a claim for the loss of a single aircraft—which can cost $100 million—could liquidate the Fund’s entire balance and still leave a substantial portion of the claim unpaid for an indeterminate period of time. Clarifying That Flights Are in the Interests of the United States

In our 1994 report, we recommended that the program’s authorizing legislation be clarified because there were ambiguities in the legislation and in FAA’s implementing regulations about the need for FAA to obtain a presidential determination that a flight is in the foreign policy interests of the United States before issuing nonpremium insurance.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the reauthorization of the Federal Aviation Administration's (FAA) Aviation Insurance Program, focusing on changes made to the program since GAO last reported on it in 1994.

What GAO Found

GAO noted that: (1) in its 1994 report, GAO found that the program did not have sufficient funds available to pay potential insurance claims in the unlikely event of a catastrophic loss; (2) progress has been made in addressing this matter; specifically, the National Defense Authorization Act for Fiscal Year 1997 made funds available to indemnify the program for losses incurred under Department of Defense (DOD)-sponsored flights, which account for the majority of flights insured; (3) while GAO's major concern has been addressed, two other concerns that it raised in the 1994 report remain unresolved; (4) gaps remain in the program's ability to pay claims for non-DOD flights; (5) although these flights account for a relatively small percentage of the flights that have been insured by the program, a single major loss could liquidate the program's available funds and leave a substantial portion of the claim unpaid; (6) FAA would need to seek supplemental funding to pay the claim, but the delay could cause financial hardship for the affected airline; and (7) GAO believes that some uncertainty about the program continues to be caused by ambiguity in the statutory language and FAA's current implementing regulations about whether the President must make a determination that a flight is in the foreign policy interests of the United States before issuing insurance.