In aviation finance transactions, insurance is often described as the one thing you cannot close a deal without. Insurance certificates offer a short-form summary of the key terms contained within the underlying policy, setting out the interests of the insured and additional insured(s). Since its inception over 30 years ago, AVN67 and its successors have played a central role in managing transaction risks by offering clear protections to lessors and financiers. Known as a “policy within a policy,” this endorsement operates alongside the primary insurance policy, creating enforceable rights for elected “contract party(ies)”, including allocation of total loss payments. Importantly for insurers, AVN67 standardises market practice and, in the event of a claim being made, provides certainty as to which parties are covered and how said claim is to be handled.

Recently, Willis Towers Watson plc (WTW) published an article re-evaluating certain aspects of AVN67B, the most commonly used form of the endorsement as follows:

Revised “Effective Date”: Traditionally, the Effective Date referred to the moment insurers were formally notified of an aircraft being added to the policy. In practice, the precise timing of coverage could be unclear, particularly when aircraft deliveries are rescheduled. WTW also notes in its article that, in reality, additions and deletions of aircraft to policies are typically automatic, and to say the Effective Date is the precise point when the insurers become aware of going “on risk” is no longer accurate. WTW proposes that the Effective Date now be defined as “the date on which the Equipment (as defined under AVN67B) becomes the insurance responsibility of the Insured in accordance with the Contracts (as defined under AVN67B)” and for novations as “the date that the [Novation Agreement] comes into effect.” This clarification is intended to reduce any uncertainty surrounding timing of coverage.

Removal of “Contract” dates: Insurance certificates often list all relevant contracts, including execution or effective dates. While intended to provide precision, this creates practical challenges when (i) contracts are amended, restated or supplemented, and (ii) insurers reviewing claims must reconcile the certificate with the operative agreements. WTW suggests that dates are now removed and that certificates identify contracts by names and parties only. This approach reduces the risk of confusion over which documents are operative and allows coverage to align with the contractual structure effective at the time of the claim.

These changes, while relatively narrow in scope, will have wider implications for lessors and financiers and their lawyers, as they aim to more accurately reflect current market practice and improve the efficiency in production of insurance certificates. 

Ultimately, these proposed AVN67 updates only have practical effect to the extent that they are adopted by insurers and brokers and supported by lawyers and clients. Any change, even one aimed at increasing certainty, introduces a period of temporary uncertainty. This is especially true in aviation, where transactions can span decades, multiple jurisdictions, insurers and regulatory regimes. Differing adoption speeds, varying interpretations or pushback from parties could create temporary uncertainty, despite the intended clarity. Both law firms and clients must therefore take a proactive approach by maintaining clear records of operative contracts and engaging early with insurers.

Stepping back, WTW’s proposed updates to AVN67 seek to better reflect contractual intentions and current market practice. In effect, these updates will avoid multiple iterations of insurance certificates due to dates changing and this new approach will therefore serve to save both time and costs for all professionals involved. Its efficacy will depend on consistent adoption, but the updates represent a meaningful refinement of a long-established market standard. 

The full WTW article ‘AVN67, its past, present and very near future!’ can be found here.