Wave of insurance claims due from aircraft leasing firms as Russia seizes jets

Dublin-based AerCap Holdings, the world’s biggest leasing firm, had 142 aircraft placed with Russia as of March 10, according to consulting firm IBA. File Picture.

Russia’s move to transfer almost 800 foreign-owned jets to its own aircraft register, amid foreign sanctions, has triggered a wave of insurance claims from leasing firms whose fleets have effectively been commandeered.

Lessors are expected to assert that registering the planes in Russia when they are already on the books in other territories amounts to a qualifying event for claims, including under their war-risk policies.

While some notices had already gone out, the effort to re-register planes in Russia has given the process impetus, sources said.

Fitch Ratings puts the insured residual value of aircraft held by Russia following its invasion of Ukraine at $13bn (€11.8bn), though with aggregate loss limits claims may be limited to $10bn.

That would still be by far the largest sum in the history of aviation insurance, it said.

In a separate report, Moody’s Investors Service estimates up to $11bn in losses.

Lloyds of London disputed the estimates from Moody’s and Fitch, saying that while the war in Ukraine represents a major claim, insurers’ liability was limited to around 10% to 15% of the asset value of jets stuck in Russia.

So it’s a much smaller element than many people would think,” said Lloyds of London chief executive John Neal.

Leasing firms seeking to repossess planes have until March 28 to cancel contracts under EU sanctions and broader banking prohibitions.

Dublin-based AerCap Holdings, the world’s biggest leasing firm, had 142 aircraft placed with Russia as of March 10, according to consulting firm IBA. SMBC Aviation Capital, also headquartered in Dublin, had 35.

Lessors with asset-backed securities exposed to Russia include Carlyle Aviation Management and Air Lease Corp, according to Kroll Bond Ratings. It remains unclear how many leased planes remain in Russia.

“It is unclear at this stage whether insurers will have to pay all these claims,” Moody’s said, citing a number of variables including the prospect of negotiations with airlines.

Most aviation policies are underwritten through the Lloyd’s of London market, with up to 40% of exposure ceded to reinsurers, according to Fitch.

Meanwhile, European shares fell, as the war in Ukraine entered its second month and Western countries bolstered Ukraine aid and expanded sanctions on Russia at a Nato summit.

The pan-European Stoxx-600 index fell 0.2% by close after struggling for direction throughout the day.

Nervousness was evident as investors scurried to sectors such as consumer staple stocks that are less impacted by economic crises.

After declining for two months on inflation concerns, monetary policy, and the Ukraine war, the Stoxx-600’s meagre gains so far in March are at risk going into the last week of the month.

Vladimir Putin’s statement that Moscow would seek payment in roubles for gas sold to “unfriendly” countries jolted gas prices in Europe and raised the risk of a supply squeeze.

Bloomberg and Reuters