Insurance and reinsurance

Captive insurance

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

Pursuant to article 24(1) of the UAE Insurance Law (Federal Law No. 6 of 2007), insurance operations in the UAE may be carried out by any of the following entities that are licensed and registered with the Insurance Authority:

  • a public stock company established in the UAE;
  • a branch of a foreign insurance company subject to article 55; or
  • an insurance agent.

Additionally, as provided under article 4 of Insurance Authority Resolution No. 42 of 2009, it is mandatory that insurance companies incorporated in the UAE have at least 75 per cent of their capital owned by UAE or GCC nationals or by juristic entities wholly owned by them. Insurance companies do not fall within the scope of the provisions of the Foreign Direct Investment Law (Federal Law No. 19 of 2018), which allows foreign investors to wholly own companies within certain sectors in the UAE.

Pursuant to article 26 of the UAE Insurance Law, property in existence inside the UAE or liabilities resulting thereof shall not be insured with insurance companies outside the UAE, but an insurer may reinsure the property inside and outside the UAE. There is no stated percentage that must be retained within the UAE in the case of reinsurance outside the UAE.

Cut-through clauses

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

Insurance and reinsurance policies are generally based on the London market wordings and cut-through clauses are relatively common.

Under the Civil Code, it is not possible for an insured or a third party to claim directly against a reinsurer. However, in certain specific circumstances, a UAE court may decide to allow a claimant to join the reinsurer to a claim issued against the insurer, including in circumstances where an insurance policy includes a cut-through clause.


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

Under UAE law, there are no specific restrictions to assignments of insurance or reinsurance and these would be legally effective in respect of UAE insurer or reinsurers. However, reinsurance agreements must be disclosed by insurers that are subject to reporting obligations.


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

Under the provisions of section 1 of the Civil Code (Hire in General), a lease (hire) confers to the lessee the right of use of the leased asset as from the date agreed in the contract and for a specific period in consideration of an ascertained rent. Article 763 of the Civil Code provides that the possession is therefore transferred to the lessee, which confers liability on the lessee.

However, it is further stated that the lessor is responsible for maintaining the full and quiet enjoyment of the leased asset by the lessee and that the lessee may cancel the lease and cease to be liable under the lease if its right of enjoyment is infringed, including in respect of any default from the lessor from repairing any defect in the leased asset. These provisions do not appear, prima facie, to be in line with the standard liability and risk allocation clauses customary in aircraft lease agreements regarding the liability of owners, lessees and financiers.

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 Civil Code gives an important place to the determination of the obligations of the parties under contractual arrangements that are listed in the first place under article 174, which provides for the sources of one’s personal obligations other than by way of statutory laws or legal events. On this basis, the courts of the UAE may give effect to the typical contractual arrangements agreed between a lessor and a lessee under an aircraft lease agreement in the event of a conflict with the general provisions of the Civil Code.

Third-party liability insurance

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

Pursuant to article 7(6) of the Civil Aviation Law, the aircraft’s crew, passengers and third parties must be insured against ground injury as per the applicable rules. The level of third-party liability cover is set out in the Safety Decision 14-2016, published by the UAE General Civil Aviation Authority on 4 December 2016. It is expressed under 10 categories in special drawing rights (SDRs) and pegged to the maximum take-off mass (MTOM) of the aircraft in question.

In relation to the level of insurance for passengers, baggage and cargo, the following limits apply:

  • in respect of passengers, the minimum insurance cover is 250,000 SDRs per passenger unless the aircraft in question is a non-commercial aircraft with an MTOM of 2,700kg or less, in which case the minimum insurance coverage is 100,000 SDRs per passenger;
  • in respect of baggage, the minimum insurance cover is 1,131 SDRs per passenger; and
  • in respect of cargo, the minimum insurance cover is 19 SDRs per kilogram.