Insurance and reinsurance

Captive insurance

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

Insurance and reinsurance activities can be carried out in Spain by Spanish entities and also by EU insurance companies, subject to the provisions of Directive 2009/138/EC (as amended) and Spanish implementing legislation (basically, the Act 20/2015).

Cut-through clauses

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

Article 78 of the Act 50/1980 on Insurance Contracts states that an insured cannot claim directly from the reinsurer any compensation or require any other duty to be performed by the reinsurer. Thus, in principle, cut-through clauses are not directly enforceable in Spain if the relevant insurance contracts are subject to Spanish law. However, article 107 of the same Act expressly allows the submission to foreign laws for aircraft insurance. Therefore, the validity of the cut-through clause will depend on the choice of law clause in the lessee’s insurance contracts. Nevertheless, some legal scholars still consider that this type of clause is not enforceable in Spain based on a literal interpretation of the said provision.

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 insurances are usual in aviation leasing and finance transactions. In general terms, all assignments of rights must be notified to the underlying debtor (ie, the insurance company). If notice is not given, payment by the underlying debtor to the assignor instead of the assignee will cause the underlying debtor to be fully and validly released from the relevant payment obligation. To the extent that assignments of insurances are intended to act as security for the transaction, they would be considered as a pledge of assets. Pursuant to the Civil Code, pledges over assets must be executed as a notarial public deed. Failure to do so entails that, while the assignment remains valid as between the parties, it will not be opposable as against third parties and will not be considered to be an executive title for the purposes of the executive proceedings regulated by the Civil Proceedings Act 2000.

Liability

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

The potential liability of an owner, lessor or financier for the operation of a Spanish registered aircraft or the activities of a Spanish operator depends on the activities actually undertaken by the owner, lessor or financier. The entering into and execution of financial transactions does not create per se any liability, but if it can be proven that the owner, lessor or financier has influenced or directed the activities of the aircraft or the operator, then liability may arise.

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 general liability regime in Spain is that of fault. Any strict liability regime can only be imposed if it is expressly contemplated under any applicable laws, such as those relating to the operation of aircraft. In general terms, however, such strict liability only affects the operator of the aircraft, and not the owner, provided that the owner has had no intervention at all.

Third-party liability insurance

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

As a member of the EU, the general requirements of third party liability coverage foreseen under EU law apply in Spain as well (essentially, those contemplated under Regulation (EC) No. 785/2006, as amended).