Insurance and reinsurance

Captive insurance

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

There is no requirement that insurance be placed in Japan nor is there a typical captive insurance regime. However, it is typical for Japanese operators to place insurance in the local market. All the Japanese insurance companies that provide aviation insurance have formed the Japan Aviation Insurance Pool (JAIP). When a member of the JAIP underwrites aviation insurance, the aviation insurance will be put in an insurance pool provided by the JAIP and will be allocated to the members of the JAIP according to a certain ratio, and then a reinsurance will be placed to cover that insurance. The JAIP sets out the standards for insurance premiums applicable to JAIP members.

Cut-through clauses

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

In the case of a cut-through clause governed by foreign law (such as English law), a court in Japan would look to that governing law to decide its effectiveness. In the case of a cut-through clause governed by Japanese law, such clause is considered to be a ‘contract for the benefit of third parties’, and once the beneficiary (such as the insured or additional insured under the primary insurance policy) expresses its intention to the reinsurer to enjoy the benefit under the cut-through clause, such clause effectively binds the reinsurer.


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 by domestic insurers can be made legally and effectively. To perfect such assignment as against third parties, notice of assignment to the reinsurer or acknowledgement of assignment from the reinsurer must be made by a document with a dated stamp such as a notarised document or a content-certified mail. It is generally the case that the Japanese insurance market is considered an internationally reputable insurance market and an assignment of reinsurances is not considered typical.


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

As a matter of general principle, for a person to be legally liable for any loss caused in connection with the operation of an aircraft or the activities of an operator, that person needs to be held to have (individually or jointly) caused such loss wilfully or negligently. Unless an owner, lessor or financier is acting wilfully or negligently or is in a position to exercise any effective control over the operation of the aircraft or the activities of the operator, such person would not be liable for such operation or activities as a matter of law.

Strict liability

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

In Japan, there is no general rule of strict liability for owners, lessors or financiers of aircraft. Unless they have (individually or jointly) caused any loss related to the aircraft wilfully or negligently, they would not be liable as a matter of Japanese law.

Third-party liability insurance

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

The Aeronautics Authority has the authority in consideration of the public interest to order that insurance contracts are entered into to cover the liability an operator may incur owing to aircraft accidents, but there is no specific minimum requirement for the amount of third-party liability coverage that must be in place. Further, Japan has ratified the Montreal Convention (1999), article 50 of which provides that the member states shall require carriers to maintain adequate insurance covering their liability thereunder.