Aircraft hull insurance
Includes aircraft hull, aircraft hull - war, and aircraft loss of use where the insured operates the aircraft and has an insurable interest in the hull.
If the contract relates to a specified aircraft registered in an EEA member state or in Switzerland, the risk is located in the country in which the aircraft is registered. The insured’s domicile does not affect this.
In other territories where Lloyd's underwriters are authorised, risk location is determined by the country where the insured is situated.
Some countries where Lloyd’s is not licensed (such as India) also define aircraft hull and liability risks as local if the aircraft is registered in the territory. In addition the insured is often prohibited from insuring such risks with an unlicensed insurer.
Where an aircraft operates from or where the contract is concluded can also affect the location of risk. Special rules apply in some Caribbean islands. For instance, if a contract insures an aircraft “ordinarily based” in Anguilla or the Cayman Islands, the risk is located there, and if the application for the insurance is made in Jamaica, the contract is subject to Jamaican regulatory requirements. It is therefore possible for a risk to have multiple locations for regulatory and fiscal purposes, i.e. a German registered aircraft ordinarily based in the Cayman Islands.
Aircraft liability insurance
Includes aircraft operator’s and aircraft owner’s legal liability, war liability and charterers’ liability in association with the aircraft operations.
The location of risk for contracts relating to specified aircraft is determined in the same way as for aircraft hull (see above). However, for contracts where the aircraft is not specified the location of risk is determined by reference to the country where the insured company or other entity covered by the insurance has its establishment(s).
Aviation liability insurance
Includes ground risks in an aviation context, such as aviation premises, hangarkeepers’, contractors’ or operators’ legal liability or aviation products liability (see specific guidance below).
The location of risk is determined in the same way as for general liability contracts, i.e. by reference to the country where the insured company or other entity covered by the insurance has its establishment(s).
Aviation products liability insurance
Contracts can cover engine manufacturers, avionic software producers or similar businesses.
An aviation product liability contract is “general liability insurance”, not “aviation insurance”. The location of risk is determined by the country where the insured company or other entity covered by the insurance has its establishment(s).
The country where an aircraft to which equipment is fitted is registered is not relevant to determination of the location of risk. In many countries different rates of tax apply to general liability and aircraft liability risks. The rates applicable to general liability then apply to aviation products liability.
Aviation cargo (goods in transit) insurance
With the exception of the specific circumstances noted below the location of risk for an aviation cargo policy is determined by reference to the country where the insured company or other entity covered by the insurance has its establishment(s).
If goods are in transit to or from Bermuda, the British Virgin Islands or Guernsey, the risk is located in the place to which or from which the transit starts or ends.
Aviation cargo risks should be treated as goods in transit risks when determining the applicable rate of tax.
Satellite and launch risks
These are not treated as aircraft hull and liability risks for regulatory or fiscal purposes. Policies covering such risks are treated for location of risk purposes either as property, general liability or miscellaneous financial loss insurances, dependent on coverage.
Global contracts
A Global contract is a contract insuring risks located in more than one country.
An aircraft hull and liability or aviation liability contract is a global contract if:
- It covers aircrafts registered in different countries.
- It is taken out by a corporate body and covers other corporate bodies or other establishments as well. The contract may refer to specific named entities or may state that all subsidiaries, associated companies, branches (or other forms of establishment) are covered under the policy.
When identifying the location of risk for a contract covering a single corporate entity its branch structure and other types of establishment associated with the risk should be considered even if they are not specifically referred to in the contract. “Establishments” are discussed in detail here.
Premium apportionment
A global contract may give rise to regulatory and tax exposures in different jurisdictions. Compliance with these requirements requires the overall premium to be apportioned between the countries in which risks are located. Guidance on premium apportionment is provided here.
