Insurance and reinsurance

Captive insurance

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

Chapter XIII, article 74 of the Civil Aviation Law provides that an insurance policy (Mexican insurance) must be obtained and contracted with an insurance entity duly qualified to do business in the country. This is in addition to the civil liability coverage that any and all operators require.

No minimum or maximum percentage of the insurance is prevented or considered in the Civil Aviation Law.

The coverage limits are based on a minimum salary wages concept, and such figures vary each year depending on the increase of the minimum salary wage.

Cut-through clauses

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

Cut-through clauses under the insurance and reinsurance documentation are legally effective.

Reinsurance

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

Reinsurance is regulated by the National Commission of Insurances and Bonds (NCIB).

Assignment of reinsurance is legally effective in Mexico. Essentially, the reinsurance market is a niche for foreign reinsurance companies. Any and all reinsurance companies, whether Mexican or foreign, must be duly registered and approved by the NCIB.

Assignments of reinsurance are typically provided on aviation leasing and finance transactions.

Liability

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

The owner, lessor or financier is not liable for the operation of the aircraft or the activities of the operator, unless such owner, lessor or financier is directly or indirectly involved in the operation of 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?

Article 61 of the Civil Aviation Law establishes that the authorised operators (permit or concession holders) of the aircraft shall be responsible for the damages caused to passengers, cargo or luggage being transported.

Based on the provisions of the Civil Aviation Law, the airline or the operator is responsible for damages caused to passengers.

Pursuant to article 1,915 of the Civil Code for the Federal District, the damage repair shall consist of the restatement of the situation prior to such damage, and when that consists of the payment of damages, pursuant to the following rules.

When damage is caused to individuals and causes death, or total or partial temporary or permanent disability, the amount of the indemnity shall be fixed applying the tariffs established in the Federal Labour Law. The basis to compute the corresponding indemnity shall be four times the highest daily minimum salary in force in the region.

Pursuant to articles 500 and 502 of the Federal Labour Law, the indemnity payment to be made in the event of the death of the victim shall be equivalent to two months’ salary for funeral expenses and the payment of an amount equivalent to 5,000 days’ salary.

In accordance with article 62 of the Civil Aviation Law, the right to recover damages is subject to that prescribed by article 1,915 of the Civil Code for the Federal District in common matters, and for all of Mexico in federal matters, the only exception being that the recoverable amount shall be three times the amount provided in such article.

Consequently, pursuant to the above, the recoverable material damages, under article 1,915 of the Civil Code, would be the amount equivalent to the minimum salary in force at the time of the death, multiplied by 790 (5,000 plus 60 days for funeral expenses). This result is multiplied by four.

When the Civil Aviation Law applies to the recoverable damages, the amount resulting from the numerical operations described in the previous paragraph is multiplied by three (article 62 of the Civil Aviation Law).

Moral damage

It is important to note that article 62 of the Civil Aviation Law only prescribes that damage to passengers is subject to the indemnities established by article 1,915 of the Civil Code for the Federal District. Such legal provision only prescribes the recovery for material damages.

Nevertheless, it is possible that a Mexican court would analyse and grant moral damages to the plaintiff if the court finds that a moral damage has been caused to such plaintiff.

Pursuant to article 1,916, a moral damage consists of ill effects suffered by a person to his or her feelings, likings, religious beliefs, decorum, honour, reputation, private life, configuration and physical aspect or the consideration that third parties may have of him or her.

In accordance with articles 1,916 and 1,916-bis of the Civil Code for the Federal District, the indemnity for moral damage must be established through a monetary amount determined by the judicial authority, taking into account the following.

The affected rights of the victim

The plaintiff must prove that they have actually suffered in terms of their feelings, likings, religious beliefs, decorum, honour, reputation, private life, configuration and physical aspects or else the considerations that third parties may have of him or her. It is not enough, pursuant to Mexican law, to make a general statement indicating that damage has been caused. Instead, the plaintiff must demonstrate to the court the alleged actual damage.

Degree of responsibility

Pursuant to this principle, the court shall determine in any event the existence of an illicit conduct, and in its case, the extent or degree of same. An illicit act or conduct is defined by article 1,830 of the Civil Code as that which is contrary to the laws of public order or against customary good behaviour.

It should be noted that, pursuant to article 1,916-bis of the Civil Code for the Federal District, in any and all events, whoever claims recovery for moral damages must fully prove the illicit conduct of the defendant and the direct damage caused by such conduct.

The economic situation of the liable party and that of the victim

The plaintiff must submit documents to the court that gives evidence of their annual income so that the court, based on such documents, can justly determine a fair indemnity with respect to the moral damage, in case that it finds that such damage existed.

The other circumstances

The court can only take into account those damages that are a direct consequence of the illicit conduct. In this regard, article 1,916-bis of the Civil Code for the Federal District expressly establishes the above.

No other recoverable damages

The Civil Code and the Civil Aviation Law establish the recoverable damages in favour of the victims, in the terms prescribed above.

Mexican law will recognise other damages in addition to material and moral damages, and consequently, it does recognise punitive damages or damages for pain and suffering or similar concepts.

Third-party liability insurance

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

The Civil Aviation Law under article 72 establishes the minimum amount for third-party liability cover.