Airline insurance premiums rocketed following September 11 attacks

On Tuesday they will call for a three-month extension to the EU guarantees to give them time to set up their own mutual fund to cover their future liabilities from terrorist attacks.

The idea is for regular commercial insurance to cover risks up to $150m (�105m) and for the fund to cover risks between $150m and $1.5bn, with governments covering risks above that.

The fund would be financed by a ticket surcharge of $0.50 if all airlines join, according to a plan drawn up by the Association of European Airlines (AEA).

The International Civil Aviation Organisation (ICAO) are discussing a similar proposal to create a global mutual insurer in Montreal on Tuesday.

But it was doubts about the viability of a global scheme have prompted European airlines to develop their own alternative, similar to the model recently proposed by US airlines.

Roger Wiltshire, General Secretary of the British Air Transportation Association (Bata) said that European airlines were supportive of the ICAO proposal as it was a long-term solution.

But he added: "Although it would be good if all the airlines of the world got together, there are some political and legal obstacles to that happening in the short term."

Political opposition

Brian Moore, chairman of the aviation division of Marsh, said the mutual would be 25% to 30% cheaper than the private insurance options currently available.

"Our only concern is whether the governments will support it. We are getting mixed signals at the moment," he said.

The plan faces resistance from insurance companies and governments like the UK and Finland which are keen on a private market solution.

Britain expressed its reluctance at a recent meeting with insurance brokers and British airlines.

Martin Hedley, chairman of the aerospace division of Willis insurance brokers said: "They made it abundantly clear they didn't want to be involved."

Benjamin Weber, executive technical partner for aviation at Partner Re said: "Personally, I have my doubts about the viability of the idea of an airline mutual insurer.

"I think the combination of the private sector providing what capacity it feels it can with governments providing a top-up in the event of a big loss is the best solution."