This is an insurance policy for lenders financing aircraft to airlines of less developed countries, where aircraft are usually lease financed and registered in the country of the carrier. The inherent risk in such financing is the political and jurisdiction risk of the country of aircraft registry that, in the event of default under the loan and/or the lease agreement, declines to authorise the repossession, deregistration and allow export of leased aircraft for resale in the currency of the outstanding debt. This is often known as the ‘cross-border’ risk and is insurable under an Aircraft Repossession Insurance policy.
Aircraft Repossession Insurance covers changes to local laws that impinge upon the security interests of international bank lenders or court orders making an unfair interpretation of existing laws that in any way deprives or causes any diminution of the assureds’ legal title and rights secured on the insured equipment. In addition, the policy covers outright confiscation or appropriation by the foreign government that may, or may not, be connected with any default under the loan or lease.