Insurance and reinsurance

Captive insurance

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

There are no requirements that insurance be placed with local insurers.

Cut-through clauses

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

While there is limited case law in this area, cut-through clauses are considered to be legally effective.


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 reinsurance are legally effective, subject to usual prerequisites on the creation of any legally enforceable contract. An assignment of reinsurance will typically be provided if the insurers are located in a jurisdiction where a cut-through clause is legally ineffective.


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

Apart from independent liability in respect of their own acts and omissions, the only relevant circumstance is strict liability as discussed in question 34.

Strict liability

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

Under section 76(2) of the Civil Aviation Act 1982, the owner of an aircraft has strict liability for loss and damage caused by the aircraft to third persons and property on the surface, although by section 76(4), liability will pass to a charterer by demise where the aircraft is chartered for a period of more than 14 days. The owner or lessor may be entitled to a contractual indemnity from the lessee.

Third-party liability insurance

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

Regulation (EU) No. 785/2004 (as amended by Regulation (EU) No. 285/2010) implemented in the United Kingdom by the Civil Aviation (Insurance) Regulations (2005), imposes insurance requirements on all air carriers and aircraft operators flying within, into, out of or over the territory of a member state. Air carriers (ie, air transport undertakings with a valid operating licence) must have aviation-specific insurance cover in respect of passengers, baggage, cargo and third parties (including property and persons on the ground). The insured risks must include acts of war, terrorism, hijacking, acts of sabotage, unlawful seizure of aircraft and civil commotion.

An air operator is defined as ‘the person or entity, not being an air carrier, who has continual effective disposal of the use or operation of the aircraft; the natural or legal person in whose name the aircraft is registered shall be presumed to be the operator, unless that person can prove that another person is the operator’.

Air carriers and operators must ensure that there is cover for every flight, whether or not the aircraft is owned, leased or operated through joint or franchised operations such as code-sharing or similar agreements. Penalties are imposed for non-compliance, including fines and imprisonment.

Commercial operations must obtain the following minimum levels of cover:

  • passengers: 250,000 special drawing rights (SDR) per passenger;
  • baggage: 1,131 SDR per passenger; and
  • cargo: 19 SDR per kilogram.

Third-party minimum insurance limits vary depending on the maximum take-off mass of the aircraft. There are 10 categories ranging from under 500kg (750,000 SDR) to over 500 tonnes (700 million SDR).