(b) Subject to §198.9(c), standby insurance without premium may be issued by the FAA if all of the following conditions have been met:
(1) A department, agency, or instrumentality of the U.S. Government seeks performance of air services operations, pursuant to a contract of the department, agency, or instrumentality; or transportation of military forces or materiel on behalf of the United States, pursuant to an agreement between the United States and a foreign government.
(2) Such department, agency, or instrumentality of the U.S. Government has agreed in writing to indemnify the Secretary of Transportation against all losses covered by such insurance. Such an agreement, when countersigned by the President, constitutes a determination that the continuation of that aircraft operation is necessary to carry out the foreign policy of the United States.
(3) A current copy of the aircraft operator's applicable commercial insurance policy or policies is on file with the FAA, including every endorsement making a material change to the policy. Updated copies of these policies must be provided upon each renewal of the commercial policy. Every subsequent material change by endorsement must be promptly provided to the FAA.
(c) Insurance is activated, placing the insurance in full force, as specified by the FAA's written notification to the operator and remains in force until such time as either of the following occurs:
(1) The requirements in §198.1 are no longer met; or
(2) In the case of non-premium insurance, an aircraft operation is no longer performed under contract to a department, agency, or instrumentality of the U.S. Government; or pursuant to an agreement between the United States and a foreign government; or the Administrator finds that commercial insurance can now be obtained on reasonable terms.
(d) Insurance policies revert to standby status upon written notification by the FAA to the aircraft operator. A policy will remain in standby status until either—
(1) The insurance is activated by written notice; or
(2) The policy is canceled.