The risk of a prolonged Russian invasion of Ukraine will further complicate the resolution of aircraft leasing insurance claims which would take years to settle, with experts believing that this would require complex arbitration and legal procedures. More than 500 aircrafts and engines are stranded in Russia after the US, UK and EU enacted a number of sanctions against the Russian government and Russian entities. As part of these sanctions, the NATO airspace has been closed to Russian-operated aircrafts. At the same time, Western governments have prohibited the provision of aviation insurance and reinsurance for any aircraft for use in Russia, among other key financial services.

In response to these sanctions, the Russian government prohibited the repatriation of aviation assets to international lessors, who were obligated to terminate their leases and demand the return of the aircrafts in March 2022.

Insurance Industry After Russia's Seizure of EU Aircrafts

What lessors are able to collect from insurers will depend greatly on the coverage that is deemed applicable. Lessors are covered under policies taken out by airlines and also their own contingent all-risks and war cover if airlines’ policies do not respond. War cover typically has a seven-day cancellation provision, which could give rise to disputes about whether the cover was canceled before it was triggered. An aviation insurance source said that one question is whether the signing of Russia’s reregistration law or the seizure of the aircraft would act as the loss trigger.

Following Russia’s actions in Ukraine in February 2022, the US, UK and EU quickly implemented a broad range of sanctions packages against Russia and Russian entities, which have continued to develop over the last several months.

These sanctions include, among other things, the closure of US, UK and EU airspace to Russian-operated aircraft, and a prohibition on UK and EU entities (or anyone within the UK and EU) leasing aircraft to Russian entities. UK and EU sanctions also prohibit certain ancillary activities, including the provision of funds, financial services, and brokering services, in relation to these prohibited activities, as well as the provision of insurance or reinsurance to Russian entities or providing insurance coverage for aircraft for use in Russia. 

In response, Russia issued a decree on March 11, 2022, pursuant to which Russia:

(a) prohibited the export of aircraft currently operated in Russia

(b) continued to recognize as valid airworthiness certificates and related documents issued by foreign aviation administrations in respect of Russian-operated aircraft, including those expiring after March 1, 2022 for the period up to September 1, 2022 (which was subsequently extended to December 31, 2022)

(c) allowed domestic Russian airlines to re-register aircraft on the Russian register without first deregistering the aircraft from their existing state of registration. Typically foreign-owned aircraft operated by Russian carriers have been registered in Bermuda or Ireland. 

Russia’s actions described above are likely to contravene its obligations under the Chicago Convention (which covers aircraft registration) and other international aviation conventions to which Russia is a party.

The ICAO Council, established pursuant to the Chicago Convention, has called on Russia to immediately cease such infractions. Interested parties should consider what (if any) consequences there are if Russia is determined to have failed to honor its obligations under the Chicago Convention and other relevant international treaties.

 It remains unclear how and when foreign owned aircraft trapped in Russia can be repossessed. Even if individual Russian airlines want to cooperate with foreign owners or financing parties seeking repossession, the obstacles put in place by the Russian authorities, combined with Western sanctions, make recovery of aircraft located in Russia extremely challenging.

The inability of recovering EU aircraft and engines from Russia triggeres insurance claims

Insurance Industry After Russia's Seizure of EU Aircrafts

According to DBRS Morningstar, the inability of recovering these assets from Russia has triggered claims under multiple primary and contingent insurance policies on aircraft and engines, with a total estimated value between $10 billion and $15 billion, according to the report.

Industry estimates are that as of February 2022 approximately 500 foreign-owned aircraft remained in Russia, with a market value greater than $10-15 billion.

These insurance policies include Hull All Risks (all risk), which covers loss or damage to an aircraft while flying or on the ground, but excludes claims caused by war.

Extended protection can be acquired under Hull War and Allied Perils Risk (war risks) insurance on a limited basis. DBRS Morningstar noted that aircraft lessors are more likely to claim under these policies.

Lessors also usually require airlines to contract primary insurance policies with certain specific coverages, as well as to be named a designated beneficiary.

There is uncertainty if lessors can claim on primary policies as the policies usually were provided by Russian insurance companies, and current sanctions make it illegal for lessors to receive payments from Russian-domiciled entities. An additional complication is that aircraft insurance provided domestically in Russia is mostly reinsured with the Lloyd’s of London market and other international insurance companies.

This structure is compelling lessors to claim directly with reinsurers of the primary insurance coverage as some of these reinsurance policies may include a “cut through” clause to which reinsurers agree to pay the reinsurance proceeds directly to the “contract parties” rather than to the reinsured (the insurance company).

Given the complexity of the insurance policies involved, the monetary values of the claims, and the prospects of protracted sanctions on Russia settling these claims will depend on long arbitration and litigation procedures.

DBRS Morningstar expects that the final resolution of aircraft leasing claims derived from the confiscation of aircraft will require resolution through complex arbitration and legal procedures. This is not unexpected for the most complicated loss events. For instance, the claims that followed after the 9/11 terrorist attacks took almost 16 years to settle.

This is further compounded by the commingling in exposures from the reinsurers participating in the primary insurance policies contracted by Russian airlines, with that of insurers and reinsurers providing coverage to the lessors’ contingent policies.

In the event that claims are considered valid, total losses for the aviation insurance industry should remain manageable despite what would become the largest single aviation loss in history.

Similar to previous major loss events in insurance history, the aviation insurance market will go through a period of deep transformation, particularly in the war risks segment, that will require a reassessment of concentration limits for repossession and nationalisation of aircraft.

Insurance Ramifications

Insurance Industry After Russia's Seizure of EU Aircrafts

Russian controlled and operated aircraft are usually insured locally in Russia and then reinsured into the London Insurance Market. Even without the news of the impending UK ban on such activities, (re)insurers would have found it difficult to continue to provide reinsurance to Russian carriers. 

For example, making claims payments into Russia may be problematic. Cut through clauses will need to be considered and, in any event, the payee may be expressly included as a sanctioned entity or may have backing from sanctioned entities/ individuals.

Therefore claims payments may require similar permission (which may not be granted).  This may also prompt reputational concerns. 

Payments to or via Russian banks subject to asset-freeze sanctions may also not be possible. There may also be difficulties with Russian carriers and reinsured paying insurance premiums to UK/EU entities.

Further, with many London Insurance Market (re)insurers and brokers having US headquarters and EU operations, they will need to consider not only UK, but also to EU and US sanctions. 

A number of practical difficulties arise in light of the above, including:

  1. Consideration of what cancellation rights are applicable to (re)insurers and whether they can rely on shorter periods for war risks. 
  2. What happens to Russian operated aircraft grounded outside of Russia and/or to leased aircraft/ parts that are currently within Russian territory. Given that there are over 500 financed or leased Russian aircraft, lessors and financiers will no doubt be considering their options (see further below).  This is particularly problematic for engines that may have been rotated and that are currently not installed on the aircraft with which they were leased. 
  3. How to move aircraft, given regulatory requirements, to ensure that they have appropriate insurances in place to cover third party and passenger liability.  Many countries will have air navigation orders requiring insurance to be in place.
  4. Lease and finance document requirements to maintain appropriate insurance and reinsurance arrangements.
  5. (In)ability to make claims payments relating to existing claims and events that pre-date the cancellation/ non-renewal of the (re)insurance. As a general principle, legal obligations arising prior to the imposition of sanctions may be permitted if a licence or exemption is granted by the relevant government. However a claim arising after the imposition of sanctions may not qualify as such an obligation.
  6. The impact of Russian governing law on the insurance policy and how that might impact claims handling and the application of AVN 67B.

Similar provisions and issues may also arise for Belarus, although the number of aircraft and lessors/creditors impacted will be smaller.

In addition to the above, to the extent that any financed/leased aircraft remain on the ground in the Ukraine (at the time of writing it is reported to be less than 60) and insured in the London Insurance Market, any claims are likely to fall under the war risk policies rather than the hull all risks. While this makes little practical difference for insureds, it will have an impact on the loss ratios for London Insurance war risk market.

Russian Sanctions and Aircraft Repossession

Insurance Industry After Russia's Seizure of EU Aircrafts

For any leased or financed aircraft or parts remaining on the ground in Russia, there are likely to be a number of obstacles in seeking repossession:

  1. All leasing and financing documents will require insurances to be in place at all times, failure to do so will give rise to a termination event or event of default, entitling the lessor or mortgagee to repossess the aircraft, among other remedies.  Aircraft operated by Russian carriers will usually also be subject to a requirement to reinsure 90% of the insured value in the international insurance markets.  We also note that insurance coverage will terminate under AVN 67B if the lease or leasing of the aircraft thereunder is terminated.
  2. Repossession of Russian controlled, registered or operated aircraft is practically impossible if located in Russia: not least due to the possible lack of insurance cover as detailed above, but also due to restrictions on entering EU airspace (Ireland has granted an exception for aircraft being returned upon a lease termination but overflying other EU airspace is still prohibited for such aircraft).  The option of using non-Russian crew to operate the aircraft in place of the Russian operator is impeded by the inability to fly into Russia from the UK and EU. Even if Russian operated or registered aircraft are located outside of Russia, any lack of insurance cover would also prevent lessors or lenders from relocating an aircraft for the purposes of re-registering and re-deploying it, even if they are able to successfully take back physical possession.
  3. Russian counter-sanctions are also in place placing restrictions on certain foreign currency related transactions and fund transfers.
  4. There is also the potential for requisition by the Russian government adding further complications to ability to repossess. Leases and finance documents treat requisition of an aircraft as a total loss scenario, but while insurance policies usually cover requisition, to the extent that insurance has been cancelled and/or coverage has fallen away, the airline would be liable to the lessor or financier to pay the total loss amount. However, the financial sanctions and the closure of SWIFT payment system to Russian banks would prevent payments from being made to the lessor/financier, leaving them with potentially unrecoverable losses subject to bringing successful legal proceedings to recover damages.
  5. Maintenance and risk of cannibalisation: Whilst aircraft remain grounded following lease terminations but not repossessed, any lack of maintenance by an operator (despite any requirements under leasing and financing documents to continue maintenance and storage even after the leasing has terminated) will directly impact the aircraft value. Similarly, the aircraft is at risk of parts being removed for use elsewhere in the operator’s fleet, particularly given the impact of the export ban on supply chain of spare parts and materials. Further, with sanctions on the export of essential parts used in civil aircraft to Russia, even if insurance remains available and in place, with companies being unwilling and/or unable to provide maintenance and repair services to Russian operated aircraft, all non-Russian manufactured aircraft may be effectively subject to grounding.

Airline Primary Insurance

Insurance Industry After Russia's Seizure of EU Aircrafts

The first level of insurance coverage for any aircraft is the primary insurance carried by the airline/operator. This coverage will typically consist of the following:

  • Hull All Risks (“Hull All Risks“) – covers loss or damage to an aircraft while flying or on the ground for an agreed value. Pursuant to AVN 48B (War, Hijacking and Other Perils Exclusion Clause), claims caused by certain events, including war, invasion, acts of foreign enemies, hostilities (whether war be declared or not), confiscation, nationalization, seizure, restraint, detention, appropriation, requisition for title or use by or under the order of any government, are excluded from Hull All Risks coverage.
  • Hull War and Allied Perils Risks (“Hull War Risks“) – writes back in, on a limited basis, cover for losses that were excluded from the Hull All Risks insurance pursuant to AVN 48B, other than losses arising out of a hostile detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter (for which no insurance cover is available in today’s market). The write-back for Hull War Risks follows LSW 555D policy form.
  • Aircraft Third Party Legal Liability (“Liability“) – covers general third-party liability of the airline, including indemnity obligations it may have as lessee under its leases. Liability cover is also subject to the AVN 48B exclusion, and write-backs are available under AVN52.

Further exclusions apply to all insurances and should be reviewed in the context of the particular circumstances.

The Hull All Risks and Hull War Risks insurances are often separately arranged by the insurance broker and will be subject to a 50/50 sharing clause pursuant to AVS 103.

AVS 103 states that if there is a total loss to an insured aircraft and the insured has a valid claim under the Hull All Risks or Hull War Risks policies but it cannot be resolved as to which policy is liable within 21 days, each group of insurers (without prejudice to their liability) will advance to the insured 50% of the agreed value.

Full terms of insurance cover are set out in an insurance policy, which are typically not shared with aircraft owners, lessors and financing parties.

The aircraft finance industry instead relies on short-form insurance certificates provided to the relevant parties that summarize key terms of the policy, such as airframe, engines, agreed value, policy limits, loss payee, names of additional insureds and relevant endorsements.

Such insurance certificates nearly universally incorporate the endorsement AVN 67B (or its successor AVN 67C), which requires that any payment under the Hull All Risks and Hull War Risks policies that relates to a total loss of an aircraft be paid to the “Contract Parties” set forth in the insurance certificate. 

Russian law requires that Russian air carriers arrange for all such primary insurance coverage to be issued by domestic Russian insurers under Russian law-governed insurance policies. 

Insurance policies (whether primary, reinsurance or contingent/possessed) may be subject to an aggregate limit per policy year for all claims under a particular policy (including fleet policies).

This limit applies to all aircraft covered by the policy (i.e., not per lessor with respect to primary insurance), and if the limit is exceeded, the excess is uninsured. It is untested how the available insurance proceeds would need to be shared in such a scenario.


Insurance Industry After Russia's Seizure of EU Aircrafts

Lessors and financing parties contractually require Russian air carriers to have their primary insurance (including the Hull All Risks, Hull War Risks and Liability insurance coverage) reinsured in the London market and/or other international aviation insurance markets. The required level of reinsurance for Russian aircraft is typically 90% of the value of the insurance policy.

Since January 1, 2017, Russian insurers have been obliged to reinsure 10% of their insured liability domestically with the Russian National Reinsurance Company (“RNRC”). Owners, lessors and financing parties presumably have rights under the RNRC policy, so interested parties should consider whether claims should be made against RNRC.

As with the primary insurance, reinsurance cover is set out in a reinsurance policy, but it is customary for interested parties to rely on short-form reinsurance certificates. Reinsurance policies (and the related reinsurance certificates) are commonly governed by either English or New York law and require disputes to be settled by arbitration. 

The reinsurance certificate may include an express cut-through clause pursuant to which the reinsurers agree to pay the reinsurance proceeds directly to the “Contract Parties” named in the reinsurance certificate rather than the reinsured (i.e., the primary insurer).

In addition (or as an alternative), the reinsurance policy may include AVN 109 (Cut-Through Endorsement), which requires that reinsurance proceeds be paid directly to the “Contract Parties”. Either an express cut-through clause or an AVN 109 endorsement, combined with the AVN 67B or AVN 67C endorsement, enables the Contract Parties, which are not otherwise in privity with the reinsurers, to have direct rights against the reinsurers under the reinsurance policies.

One important caveat, however, is that cut-through clauses (including AVN 109) typically state that direct payment to the “Contract Parties” is subject to compliance with local law. It is unclear whether cut-through clauses would contravene Russian law.

In response to the Western sanctions, as of March 14, 2022, the reinsurance rules in Russia were amended to prohibit Russian insurance companies from reinsuring their risks with reinsurance companies registered in the so-called “unfriendly states” or controlled by entities from the so-called “unfriendly states” unless a special permit is obtained from the Central Bank of Russia.

Claims Against Reinsurers and Reinsurers’ Defenses

Claims Against Reinsurers and Reinsurers' Defenses

In order to make a claim against insurers and reinsurers for a total loss of an aircraft, owners, lessors and financing parties will need to first show that a total loss of the aircraft has actually occurred. Claims would likely be based on total loss resulting from theft or confiscation, nationalization, seizure, restraint, detention or requisition of title to or use of an aircraft by the Russian government, although claimants are generally careful to pursue all theories of recovery under the reinsurance.

Claims may also be based on constructive or agreed total loss, depending on the particular circumstances of each aircraft.

Even if owners, lessors and financing parties can show that a total loss of the aircraft has occurred, reinsurers may have a defense against paying claims as a result of the termination of the reinsurance policies pursuant to AVN 111(R) (Sanctions and Embargo Clause). AVN 111(R) provides that “if, by virtue of any law or regulation which is applicable to a Reinsurer at the inception of this Policy or becomes applicable at any time thereafter, providing coverage to the Reinsured is or would be unlawful because it breaches an embargo or sanction, that Reinsurer shall provide no coverage and have no liability whatsoever…”

For UK and EU reinsurers, if affected reinsurance policies were not cancelled or terminated by March 8, 2022 and February 26, 2022, respectively, the coverage provided under them nonetheless ceased to be effective to the extent it would infringe the sanctions (subject to the wind-down periods provided for under the UK and EU sanctions regimes).

 AVN 111(R) is a standard aviation market reinsurance provision, and a version of AVN 111(R) is usually included in policies. However, the absence of an AVN 111(R) provision in a particular reinsurance contract would not prevent the application of the UK and EU sanctions prohibiting reinsurance for the benefit of Russian carriers. Notwithstanding the implementation of the sanctions prohibiting insurance or reinsurance for the benefit of Russian carriers, some reinsurers still opted to serve notices of termination or cancellation of the policies. 

Under AVN 67B and AVN 67C, it is not yet settled (anywhere in the world) whether continuing coverage under AVN 67B or AVN 67C creates a separate policy (or separate right to make a claim) in favor of the owner, lessor and financing parties or whether coverage is contingent upon the underlying reinsurance policy with the Russian insurer still being in place.

It is therefore uncertain whether AVN 111(R) prohibits the payment of reinsurance claims by EU reinsurers to (non-Russian) owners, lessors and financing parties when the policies reinsured insurance provided by Russian insurers to Russian carriers. We are not aware of any legal precedent for how an AVN 67B or AVN 67C clause works when the underlying payment to the reinsured would be prohibited by AVN 111(R).

Lessor Contingent and Possessed Insurance

Insurance Industry After Russia's Seizure of EU Aircrafts

Most aircraft leasing companies maintain their own contingent insurance and possessed insurance policies, which provide additional insurance coverage for their aircraft in certain circumstances.

Both contingent insurance and possessed insurance policies will cover a lessor’s aircraft for Hull All Risks and Hull War Risks coverage, similar to an airline’s primary insurance. Lessor policies are often governed by English law but other choices of law are also possible.

Contingent insurance provides insurance coverage where an airline/operator has failed to adequately insure an aircraft, or where the airline/operator’s insurer does not pay the aircraft owner after a valid claim is made for reasons other than the insolvency of such insurer. 

Possessed insurance provides insurance coverage where an aircraft is in the possession of the lessor or in the process of being repossessed. 

Numerous aircraft leasing companies have filed claims against their insurers under such policies, but resolution of these claims is unclear as this point. Outcome of claims may depend on the individual fact patterns, including the status of the relevant aircraft, the terms of the underlying policies, the actions taken by the relevant parties to seek repossession and actions of the Russian government to prevent return of aircraft and to reregister aircraft in violation of applicable treaties. 

Claims under lessor policies would not be payable to extent that the reinsurance or primary insurance has paid out or the Russian carriers have satisfied a direct claim.

Where an overlap of insurance cover arises, English law prevents an insured from recovering the full amount of the loss from more than one policy. Subject to any specific clauses to the contrary contained in a particular policy, the insured is entitled to claim its full loss from whichever insurer it chooses but will not be able to recover more than the amount necessary to indemnify it against the losses.

There was some concern that contingent and possessed insurance may now be at risk given EU insurers’ coverage has ceased as a result of implemented sanctions. However, guidance published by the European Commission indicates that insurance and reinsurance of aircraft is not considered “for a person in Russia or for use in Russia”, where such insurance or reinsurance is provided for the benefit of a non-Russian owner and not for the benefit of the actual user or operator of the aircraft. Corresponding guidance has also been published by the UK.

This is understood to apply in circumstances where aircraft remain in Russia against the will of the non-Russian owner and despite the non-Russian owner’s demand for their return.

Therefore, it appears there are not currently any sanctions which would prohibit UK or EU insurers from providing and making payments under existing contingent or possessed insurance on aircraft in possession of Russian carriers.

With respect to claims made under contingent Hull War Risks policies, aircraft are not usually fully insured but are insured for ‘exposures’, therefore the loss would be capped at an aggregate amount as opposed to the total loss for each aircraft. On the other hand, claims made under standard contingent Hull All Risks policies would, if successful, offer loss coverage for each individual aircraft at the agreed value as opposed to an aggregate (and capped) loss.

Direct Claims against Russian Carriers

Insurance Industry After Russia's Seizure of EU Aircrafts

In addition to making claims against insurers, reinsurers and contingent/possessed insurers, aircraft owners, lessors and financing parties may also pursue direct claims against the Russian air carriers. These claims may include a claim for the tort of conversion of the owner’s property.

The aircraft leases were required to be terminated under UK and EU sanctions, although it is unclear whether certain provisions in the leases that are expressly stated to survive termination (such as indemnities and obligation to return the aircraft) would survive the legally mandated termination.

Owners, lessors and financing parties may also have contract claims that survive termination of the lease or other relevant contract. Aircraft operating leases typically require the payment by the lessee to the lessor of an agreed value in the event of a total loss of the aircraft. The total loss provisions of a lease will likely be triggered as a result of the Russian government’s prohibition on exporting the aircraft. 

If an insurer (contingent or otherwise) or reinsurer makes a payment under a policy, they may have the right to be subrogated to the rights of the aircraft owners, lessors and financing parties and pursue any direct claims against the Russian carrier.

Under AVN 67B and AVN 67C, insurers or reinsurers have the right to be subrogated to the rights of the Contract Parties to the extent of any payment under the policy, but may not exercise such right without the consent of those indemnified (such consent not to be unreasonably withheld). 

The location of assets of Russian insurers and Russian carriers that could be attached to satisfy a claim will also be relevant, particularly assets located outside of Russia. Russian entities have tried to limit the exposure of their assets outside of Russia to the extent feasible. 

Claims against Russian Insurers

Some aircraft lessors have made claims against primary insurers in Russia. Recovery on these claims is not expected in the near to medium term. Some claims have also been made by lessors against reinsurers prior to February 26, 2022 but these claims have not yet been settled and questions on coverage remain. 

Claims against primary Russian insurers are likely to be pursued ultimately by whichever entity bears the economic loss for the value of the aircraft (owners, lessors, contingent insurers, reinsurers, etc.) or anyone who may purchase such claims.

Enforcement of claims against Russian parties would likely necessitate initiating proceedings before courts in the Russian Federation, which would be costly, time consuming and at risk of geo-political interference given the extensive legislation and guidelines passed in Russia since February 2022 restricting the repossession or redelivery of foreign owned aircraft. In that regard, English and New York law judgments have not generally been recognized in Russia. However, foreign arbitration awards have historically been enforced in Russia.

In any case, voluntary payments from Russian insurers to foreign parties are unlikely to be forthcoming. The practicalities of any payments are also problematic, due to export controls implemented in Russia, sanctions and an inability to transfer funds abroad.

Owners, lessors and financing parties could evaluate whether they have claims against the Russian state under applicable investment treaties or otherwise for the decrees issued and actions taken to prevent the return of aircraft leased to Russian carriers. These claims could potentially be based on theories such as direct, indirect and creeping expropriation and arbitrary and discriminatory treatment. Insurance companies that pay claims could evaluate whether they have claims against the Russian government as well.

General Observations

Insurance Industry After Russia's Seizure of EU Aircrafts

The magnitude of aggregate claims against insurers and reinsurers is unclear. Worst case scenario estimates are in the range of $10 billion to $15 billion. The ultimate amount of claims will depend to some extent on future developments in the Russia/Ukraine situation.

The extent of further individual risk sharing by members of reinsurance syndicates or issuers of lessor contingent and possessed policies is not known.

The uncertainty on the total value and number of claims may deter individual insurers from paying claims. In addition, the cumulative losses that may be borne by a particular insurer may also impact its decision to pay a claim or resist payment. 

Some commentators have argued for a UK/EU governmental solution (but substantial hurdles exist).

The exact terms of a particular policy, the adherence to procedural requirements by the claimant and the precise facts surrounding a particular aircraft will be critically important. Interested parties should also consider the implications of a contractual assignment of insurance/reinsurance rights. These assignments are often required by financing parties as a condition to funding loans, particularly in transactions governed by English law.

Some litigation finance companies have expressed interest in funding aviation insurance claims. The litigation finance companies sometimes get others to share in the funding of a claim. There has been some suggestion that certain insurance claims have started to trade. While most policies require consent of the insurers to assign rights under the policy, interested parties should consider whether such restrictions are enforceable under applicable law. 

The Russian actions in Ukraine and the resulting sanctions and insurance claims are likely to have a significant impact on future aviation insurance rates and terms. This is already being seen as policies come up for renewal.

There have been a few successful repossessions of foreign owned aircraft outside of Russia, and the Russian government has advised Russian operators not to operate foreign owned aircraft on international routes other than to “friendly countries” to limit the risk of potential repossession/enforcement actions. In addition, at least two Russian airlines have petitioned the Russian government to allow them to return aircraft to foreign lessors in certain limited circumstances.

Denied claims, or delays to the payment of claims, could have a significant impact on certain lessors and, perhaps, financial institutions. In some cases, this could impact the viability of lessors that are less well funded. 

Even relatively conservative estimates of insurance claims totaling $10-15 billion would be by far the largest annual claims in the history of aviation insurance.

Since aviation insurance exposure is more concentrated among insurers than business-interruption and event-cancellation insurance, there is concern that some Lloyd’s underwriters could suffer above-average losses, which would make their credit profiles vulnerable to further large losses or external shocks.

There is some indication that owners, lessors and financing parties have struggled to appoint English counsel in the London market to pursue potential insurance claims, due to English firms being either conflicted (and therefore unable to act) or, unwilling to act against insurers and reinsurers for reputational and relationship reasons. 

Publicly Reported Insurance Claims

AerCap submitted an insurance claim of $3.5 billion under its $5 billion all risks policy, in relation to aircraft and engines remaining in Russia. In addition, for the three months ended March 31, 2022, AerCap booked a $2.7 billion pre-tax net charge to their earnings on more than 100 aircraft it owns that are stranded in Russia.

DAE wrote off $576.5 million relating to 19 aircraft in Russia for the three month period ending March 31, 2022 and has reportedly filed insurance claims of $1 billion under certain insurance policies.

Air Lease Corp has written off $802 million in connection with 21 owned aircraft and 6 managed aircraft stuck in Russia, and is pursuing insurance claims related to such aircraft.


AUTHORS: Michael W. Smith – Partner White & Case New York, David Grotts – Counsel White & Case Los Angeles, James Holder – Associate White & Case London

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