LONDON--Plans to establish an international terrorism insurance pool for aviation risks suffered a setback earlier this week, when two key governments failed to support the plan.

At a meeting of the International Civil Aviation Organization in Montreal, both the United Kingdom and Germany declined to back the proposed pool, which included a provision that would make governments the insurers of last resort.

The ICAO, which has 187 member countries, had proposed that airlines buy commercial insurance for terrorism risks up to $150 million, creating a fund through a levy on air passengers to cover risks between $150 million and $1.5 billion, with governments to cover any losses beyond that.

A spokesman for the U.K. Treasury said, "We are perfectly happy to listen to any proposals, but the ICAO proposal, so far, is short of details." The U.K. government is reluctant to support a plan under which it would still be liable for aviation losses, the spokesman said.

The United Kingdom, like several other countries, has been providing government-backed insurance for airlines since commercial insurers excluded terrorism risks shortly after Sept. 11. The U.K. government plan is scheduled to expire March 20.

Despite the lack of support by the United Kingdom and Germany, the ICAO proposal is not dead, said Ken Coombes, vp at broker Marsh Ltd. in London. Marsh, along with Willis Ltd. and Aon Ltd., is advising the airline pool.

ICAO still agreed to set up a study group--likely to consist of representatives from about 10 major countries--to study the proposal, Mr. Coombes said.

Martin Hedley, chairman of the aerospace unit at Willis Ltd. in London, said the brokers "are trying as hard as we can to find as economic a form of cover as is available in view of the stand taken by the governments."

The Assn. of European Airlines is considering setting up a pool similar to that proposed by the ICAO for its 26 member airlines (see World Updates, page 15), but this setup too would seek British and German government support.