In Brief: Insurance Considerations for Aircraft Financing and Leasing in Sweden

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Insurance and reinsurance

Captive Insurance

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

There is no common practice for placing insurance in the Swedish market. For certain activities, Swedish law requires the insurance to have a local connection. None of these activities, however, is likely to apply.

Break clauses

Are curtailment clauses in insurance and reinsurance documentation legally effective?

A direct reinsurance access clause would, in general, be considered valid under Swedish law. However, the insurance company providing the reinsurance cover can be deemed to carry on insurance business in Sweden by means of reduction clauses, thereby triggering a licensing requirement for insurance business under Swedish law.

Reinsurance

Are reinsurance cessions (by domestic or captive insurers) legally effective? Are reinsurance cessions generally provided on aircraft leasing and financing transactions?

The Swedish Insurance Contracts Act (2005) does not apply to reinsurance contracts. The aviation reinsurance market in Sweden is rather limited and Swedish legislation provides little guidance. Therefore, foreign customary law is used as a reference. However, ceded reinsurance is likely to be legally effective under Swedish law if permitted by the reinsurance contract. In the absence of such a provision in the contract, the general principle of Swedish law would be that the rights or obligations arising from the reinsurance contract cannot be assigned unless the other party has consented thereto.

Responsibility

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

Under the Air Carriage Damage to Third Parties Act (1922), the lessor (as owner) of an aircraft will be strictly liable for all damage caused to third parties by the operation of the aircraft.

However, the lessee or operator and not the lessor or owner will be liable for damage caused to third parties by air transport if:

  • the lessee or operator and the lessor enter into an agreement that the lessee and not the lessor is liable;
  • the lease is for a period of more than one year;
  • the lessee or operator has the right to use its own pilots or pilots or others on board the aircraft, or is authorized to use the aircraft for the purpose of commercial air transport; and
  • the lessee’s right to use the aircraft is noted with the Swedish Transport Agency with the operational register.

It is unlikely that a financier or mortgagee could be held liable for the actions or omissions of the counterparty.

Strict Liability

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

Under the Air Carriage Damage to Third Parties Act (1922), the lessor (as owner) of an aircraft will be strictly liable for all damage caused to third parties by the operation of the aircraft.

However, the lessee or operator and not the lessor or owner will be liable for damage caused to third parties by air transport if:

  • the lessee or operator and the lessor enter into an agreement that the lessee and not the lessor is liable;
  • the lease is for a period of more than one year;
  • the lessee or operator has the right to use its own pilots or pilots or others on board the aircraft, or is authorized to use the aircraft for the purpose of commercial air transport; and
  • the lessee’s right to use the aircraft is noted with the Swedish Transport Agency with the operational register.

It is unlikely that a financier or mortgagee could be held liable for the actions or omissions of the counterparty.

Liability insurance

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

Regulation (EC) No 785/2004 of the European Parliament and of the European Council on insurance requirements for air carriers and aircraft operators, as amended, provides for minimum insurance requirements in liability for passengers, baggage, cargo and third parties, and is applicable in Sweden. It specifies minimum insurance requirements for third party liability coverage ranging from 0.75 million to 700 million Special Drawing Rights, depending on the maximum take-off weight of the specific aircraft.

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