Risk of a Protracted Russian Invasion of Ukraine Will Further Complicate the Resolution of Aircraft Leasing Insurance Claims

DBRS Morningstar published a commentary analyzing the credit implications of aircraft leasing insurance claims for global insurance and reinsurance companies.

Key highlights include the following:

-- The total value of aircraft lessors’ stranded assets in Russia is estimated to be between $10 billion and $15 billion.

-- Aircraft lessors are likely to claim under their contingent Hull War and Allied Perils Risk insurance policies given existing sublimits for confiscation, nationalization, and appropriation of assets.

-- DBRS Morningstar expects that the determination of the validity of a lessor’s position and any eventual settlement of claims will be drawn out as a consequence of the complexity of these policies.

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

“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,” said Marcos Alvarez, Senior Vice President and Global Head of Insurance. “This is further compounded by the comingling 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.”