ARTICLE
15 February 2023

The Case For Captives In The Aviation Industry Is Stronger Than Ever

C
Conyers

Contributor

Conyers is a leading international law firm with a broad client base including FTSE 100 and Fortune 500 companies, international finance houses and asset managers. The firm advises on Bermuda, British Virgin Islands and Cayman Islands laws, from offices in those jurisdictions and in the key financial centres of Hong Kong, London and Singapore. We also provide a wide range of corporate, trust, compliance, governance and accounting and management services.
Rising insurance premium rates, limited capacity with commercial insurance carriers and a looming global recession made 2022 extremely challenging for aviation insurance buyers.
Bermuda Transport
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Rising insurance premium rates, limited capacity with commercial insurance carriers and a looming global recession made 2022 extremely challenging for aviation insurance buyers. In this environment, the aviation industry should be looking at creative strategies, including captive insurance structures, to improve risk management.

A captive can successfully mitigate the impacts of commercial insurance capacity shortages, excessive premium rates or aviation assets and risks that fall outside available coverage in the market. It gives airlines and other participants in the aviation industry an alternative when it is undesirable (or impossible) to buy from the commercial insurance market. Hull war and excess war renewals, for example, are seeing substantial pricing increases given the Russia-Ukraine war and the confiscation of western-owned aircraft in Russia.

In addition to hull deductible and liability cover, in which a captive may only take a small proportion of the overall risk, a captive will permit other risk management diversification strategies to be deployed for hard-to-insure or emerging risks, like cyber risks (cyber renewals generally are some of the steepest increases in the market) and environmental risks (given climate change, which poses challenges for the aviation industry). A captive provides ultimate flexibility around the type of risk it can insure, provided that it is structured and capitalised adequately.

Conyers is a market leader in providing legal advice and services to Bermuda's insurance sector. We have contributed to drafting much of the insurance legislation and regulations in Bermuda, which has greatly benefitted our clients' experiences in the sector. Our lawyers are commercially focused and are experts in all aspects of insurance, including captives.

If you are considering incorporating and registering a captive in Bermuda for aviation-related coverage, Conyers can assist you with our full suite of services, including legal, administrative and ongoing regulatory services.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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