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Iceland’s ash cloud threatens travel insurers again

European flights have returned to normal after the latest Icelandic volcano eruption last week sent a column of ash high into the atmosphere over northern Europe.

There were fears the eruption of the Grimsvotn volcano would result in a long shutdown of air travel in Europe similar to last year’s event.

This would have seen a massive number of claims on travel insurance policies, but this month’s event only lasted a couple of days and affected northern European airports where about 1000 flights were cancelled.

In a separate move, volcanic ash claims from last year rejected by travel insurers can now be taken to the UK’s Financial Ombudsman Service (FOS).

The ombudsman found insurers were wrong to reject all travel insurance claims stemming from the volcanic ash incident.

More than 600 complaints have been received after last year’s eruption, and the Association of British Insurers (ABI) estimates insurers have already paid out more than £70 million ($107 million).

Travellers affected by last year’s eruption now have six months from the point their claim was lodged to contact the service. It expects additional claims will run into tens of millions of pounds.

Insurers argued last year disruptions were caused by poor weather, thereby making the claims invalid, but Ombudsman Caroline Mitchell totally rejected this.

ABI Director of General Insurance and Health Nick Starling says the industry worked hard to settle claims fairly.

“Following the unprecedented disruption to air travel last year from volcanic ash, insurers paid out £70 million to policyholders, in many cases as a goodwill gesture,” he said.

“In response to public concern, some insurers now offer specific insurance against cancellation, delay and abandonment due to volcanic ash disruption,” he said.