Business Aviation & The Boardroom - International Insurance Considerations

For businesses that compete on a worldwide basis- the ability to fly anywhere on the planet- on their timetable is a tremendous business tool- says Stuart Hope. However- each country has its own rules- regulations and security concerns an aircraft owner’s flight department must understand.

Boardroom

Stuart Hope | 1st May 2011

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Stuart Hope

Stuart Hope is a co-owner of Hope Aviation Insurance. His career as an aviation insurance broker...
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Business Aviation & The Boardroom - International Insurance Considerations

International Insurance Considerations
For businesses that compete on a worldwide basis- the ability to fly anywhere on the planet- on their timetable is a tremendous business tool- says Stuart Hope. However- each country has its own rules- regulations and security concerns an aircraft owner’s flight department must understand.

The European Union requires any aircraft flying into or over the airspace of an EU member nation- to carry prescribed liability coverage and limits based on certain criterion including the Maximum Take-Off Weight (MTOW) of the aircraft- the number of passengers- and whether the flight is commercial or non-commercial.

That formula result is then multiplied by a factor called the SDR (Special Drawing Rights) which determines the required liability limit for a given aircraft. (It should also be noted- certain member countries within the EU require that their own specific insurance forms be completed in addition to the “standard” EU insurance certificate.)

If you will operate your aircraft within a foreign country- be aware that many countries have rigorous rules- regulations and limitations on the carriage of passengers and/or goods within their borders. This is referred to as cabotage.

Such regulations typically differ from one country to the next and are often inconsistent in scope. They are generally applicable to both commercial and private operators (whether you are considered a private or commercial operator falls to the individual interpretation of each foreign country).

The pilot in command is responsible (read liable) for knowing the cabotage restrictions of each country where operations will be conducted. Land your aircraft in a country without having the required paperwork verifying compliance with that country’s rules and regulations including insurance- and you risk a potential six-figure penalty and/or confiscation of the aircraft. While in most cases you will get your aircraft back- the amount of time and money spent resolving the violation to the satisfaction of the governing body could be costly.

OFFICE OF FOREIGN ASSETS CONTROL
Operators flying US-registered aircraft in international airspace should be familiar with the US Treasury Department’s Office of Foreign Assets Control (OFAC) which administers and enforces sanctions policy.

Many insurance policies now contain the following language: “In accordance with OFAC regulations- if it is determined that you or any other insured- or any person or entity claiming the benefits of this insurance has violated US sanctions law or is a Specially Designated National and Blocked Person- as identified by OFAC- this insurance will be considered a blocked or frozen contract and all provisions of this insurance will be immediately subject to OFAC. When an insurance policy is considered to be such a blocked or frozen contract- neither payments nor premium refunds may be made without authorization from OFAC”.

If you clip a taxiway light in a foreign country and the entity to whom your insurer would normally make restitution is identified on the “Specially Designated Nationals and Blocked Persons” list (www.treas.gov/ofac) you may end up with an unintended “vacation” in that foreign country until you can get things sorted out.

HELP ON THE HORIZON
In an effort to level the playing field for international aircraft operators- the International Business Aviation Council - IBAC (www.ibac.org) - of which NBAA and other associations are contributing members (it's an international association- not a governing body) designed IS-BAO (International Standard for Business Aircraft Operators) to address certain ICAO requirements.

The International Civil Aviation Organization (www.icao.int) is a governing body that establishes standards- but leaves enforcement of those standards to member countries. Currently there are different interpretations as well as considerable confusion regarding who needs what and when- because each country has introduced its own timeline and enforcement protocol. Some progress- however- is being made.

Amendment 27- Annex 6- Part II of ICAO states that effective Nov 2010- non-commercial turbojet or large aircraft are supposed to have an SMS (Safety Management System) in place to operate internationally. At this time- Bermuda is the only country that enforces this and conducts 'random checks' of foreign aircraft for compliance.

Other countries- especially Europe- are following suit albeit in a hit-and-miss manner. There is such a thing as a 'SAFA Check” (Safety Assessment of Foreign Aircraft)- which is the equivalent of an American FAA ramp check. Aircraft operators could land in a foreign country and be greeted by the local authorities for such a check- which consists of 54 specific points - and they may get tagged if their airplane and paperwork are not up to speed.

I rarely hear of horror stories from my clients who operate internationally- but in this post 9/11 world- operating an aircraft has become more restrictive. You certainly wouldn’t want to become a “test case”. Your pilots must be on top of their game- not only in the cockpit- but also with the rules and regulations that must be met on trips outside their home boundaries.

Almost universally- corporate aircraft operators traveling out of the country utilize the services of a “ground handler” such as Baseops- Universal and Jeppesen- among others- to help them comply with the myriad requirements and regulations they face upon landing at a foreign port of call. Be careful out there!

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