Insurance and reinsurance

Captive insurance

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

There is no prevailing practice to place the insurance in the Swedish market. There are certain activities for which there are requirements under Swedish law that insurance must have a local connection. None of these activities are, however, likely to apply.

Cut-through clauses

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

A cut-through clause accessing reinsurance would, in general, be considered valid under Swedish law. However, the insurance company providing the reinsurance cover may be deemed to conduct insurance business in Sweden by way of usage of cut-through clauses and thereby trigger a licensing requirement for insurance business under Swedish 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?

The Swedish Insurance Contracts Act (2005) does not apply to reinsurance contracts. The reinsurance market for aviation in Sweden is rather limited, and Swedish law provides little guidance; therefore, foreign customary law is used for reference. However, the assignment of reinsurance is likely to be legally effective under Swedish law if permitted under the reinsurance contract. In the absence of such a provision in the contract, the general principle under Swedish law would be that rights or obligations under the reinsurance contract can only be assigned if the other party has consented thereto.

Liability

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

According to the Act on Damage Caused to Third Parties by Air Carriage (1922), a lessor (as owner) of an aircraft will be strictly liable for all damage caused to third parties in operating the aircraft.

However, the lessee or operator and not the lessor or owner will be liable for damage caused to third parties by air carriage in the event that:

  • the lessee or operator and the lessor enter into an agreement stating that the lessee and not the lessor shall be liable;
  • the lease is for a term exceeding one year;
  • the lessee or operator is entitled to use its own or other pilots or commanders on the aircraft or is entitled to use the aircraft for commercial air transport purposes; and
  • the lessee’s right to use the aircraft is noted with the Swedish Transport Agency in the Operational Register.

It is unlikely that a financier or mortgagee could be held liable for any actions or omissions of the counterparty.

Strict liability

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

See question 33.

Third-party liability insurance

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

Regulation (EC) No. 285/2010 of 6 April 2010 amending Regulation (EC) No. 785/2004 of the European Parliament and of the Council on insurance requirements for air carriers and aircraft operators provides for minimum insurance requirements in respect of liability for passengers, baggage, cargo and third parties and is applicable in Sweden. It specifies minimum insurance requirements in respect of third-party liability cover ranging from 0.75 to 700 million special drawing rights, depending on the specific aircraft’s maximum take-off weight.