Insurance and reinsurance

Captive insurance

Summarise any captive insurance regime in your jurisdiction as applicable to aviation.

There is no captive insurance regime relevant to aviation in South Africa. There is also no domestic requirement that insurances be placed in South Africa.

Generally in local or smaller transactions, insurances are placed in the local market (these may be reinsured through the foreign markets). In almost all transactions involving a cross-border element the requirement is that insurances be placed in the internationally accepted aviation markets.

Cut-through clauses

Are cut-through clauses under the insurance and reinsurance documentation legally effective?

Generally the requirement for cut-through clauses appears in cross-border leasing or lending transactions. The insurances under these transactions are generally placed in the internationally accepted aviation markets. The enforceability or otherwise of these clauses will thus depend on the governing law of the relevant instruments. South Africa will generally enforce these arrangements if they are enforceable under the governing law of the jurisdiction by which they are expressed to be governed.

Reinsurance

Are assignments of reinsurance (by domestic or captive insurers) legally effective? Are assignments of reinsurance typically provided on aviation leasing and finance transactions?

Assignments of reinsurances are not typically provided in aviation leasing and finance transactions. We are not aware that any assignment of reinsurance has been tested locally. See question 31 in regard to cut-through clauses. We believe that similar principles will apply to an assignment of reinsurance.

Liability

Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?

Strictly speaking the answer is no, but there is always the spectre of a delictual (tort) or other derivative claim in this context.

Strict liability

Does the jurisdiction adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft?

The owner of an aircraft carries strict liability for damage that it causes under the governing legislation in South Africa. The owner for this purpose is the registered owner of the aircraft and not the beneficial owner. Certain prescribed insurances are required to be effected by the registered owner to cover this liability.

Third-party liability insurance

Are there minimum requirements for the amount of third-party liability cover that must be in place?

Yes. The limits were set some time ago, however, and are inadequate and do not reflect current market requirements.