Boeing has said it wants to resume production of its long-haul jetliner

The Aviation Insurance Offices Association (AIOA) said on Wednesday it thought insurers would not cancel coverage completely.

We believe there is a strong market Lars Andersen, programme manager Boeing

Recent press reports had indicated insurers could cancel cover in event of a war with Iraq, threatening a repeat of the insurance crisis following the September 11 attacks.

Airlines shares were hit hard earlier in the week as the industry's outlook was darkened by a possible war with Iraq.

With war looming, AMR, the parent company of American Airlines, was dropped from one the US's key stock market indexes, the S&P 500.

But the world's largest commercial aircraft maker, Boeing, said on Wednesday it will resume production of its long-haul jetliner 777-200LR.

Long-haul

Production of the airliner, which can fly 300 people non-stop from New York to Singapore, was halted following September 11.

Boeing said Pakistan International Airlines and EVA Aiways of Taiwan had ordered five long-haul planes.

"We believe there is a strong market," said Lars Andersen, programme manager for the long-range Boeing 777s.

"As the world economy improves and travel growth returns, we are convinced that we will see additional sales."

Governments had to bail out the airline industry after September 11 because insurers had pulled third party liability coverage for terror attacks.

Peter Butler, chairman of the Aviation Insurance Offices Association said: "I think insurers will be trying hard not to cancel coverage completely and therefore there should not be a case for government intervention."