Insurance and reinsurance

Captive insurance

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

Insurance under Russian law is a licensed activity, and the interests and liabilities of Russian airlines must be insured by Russian insurance companies. There are multiple insurance companies specialising in aviation insurance.

At the same time, Russian law permits a two-level structure with initial insurance in the Russian market and reinsurance in an international market. Such structure is widely used in aircraft finance and leasing.

In July 2016, a new law was adopted in Russia establishing the National Reinsurance Company, which is 100 per cent owned by the Central Bank of the Russian Federation. The new law contains a requirement to obligatorily reinsure up to 10 per cent of the total reinsurance amount with the National Reinsurance Company.

Cut-through clauses

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

There are no cut-through clauses in Russian law governed insurances. Although reinsurance cut-through clauses are standard for common law lease agreements with Russian lessees, they might not be enforceable in Russia. There is a view that, owing to Russian currency control restrictions, the payment of reinsurance amounts by the reinsurer directly to the loss payee based on a cut-through clause will be in breach of Russian law.

Reinsurance

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

Assignment of reinsurance placed outside Russia is typical, and Russian law is not applied to it. However, there might be issues with enforcement of such assignment in Russia.

Liability

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

By default, the owner of an aircraft is deemed to be liable for the damage caused by such aircraft and will need to prove that operational control was with the lessee to avoid such liability.

The owner, financier or lessor may be held liable for damages caused by an accident only if it is involved in the operation of an aircraft or its maintenance, or if the relevant damage was its fault. Russia is a party to the Rome Convention on Damage Caused by Foreign Aircraft to Third Parties on the Surface of 1952, setting out criteria for operational control over the aircraft.

Strict liability

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

No. See question 33.

Third-party liability insurance

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

For flights over the territory of Russia, a minimum amount of third-party liability cover is calculated as statutory minimum wage as of the date of the insurance contract multiplied by two and multiplied by maximum take-off weight of the aircraft in kilograms. For international flights, regulation of the relevant state must be taken into account for calculation of this minimum amount.