Reaching a Final Destination? High Court Rules in Favour of Lessors in Russian Aircraft Insurance Test Case

This commentary discusses the potential financial implications of the June 2025 decision by the High Court of Justice in London (the Court) for aircraft lessors and insurers regarding assets stranded in Russia following the invasion of Ukraine.

Key highlights include:

-- The Court's decision confirms that losses stemming from Russia's seizure of leased aircraft and engines are covered under war risk policies.

-- Insurers will face elevated legal, reserving, and reputational risks amid continuing uncertainty over appeals and broader claims exposures.

-- The ruling supports our view that lessors have been thoughtful in addressing the various potential risks faced when leasing aircraft assets across the globe.

"Lessor earnings in Q2 2025 will benefit from the recoveries obtained under the judgement given that receipt of the proceeds is expected no later than 2 July 2025. However, since the onset of the Ukraine conflict, we have treated the financial impacts of this event as nonrecurring items and thus excluded them when calculating lessors' core earnings", said David Laterza, Associate Managing Director, North American Financial Institution Ratings.

"A successful appeal could narrow or reverse parts of the liability findings, especially around the interpretation of policy exclusions in proximate cause. However, absent a strong overturn on appeal, the ruling's broader legal and financial implications will persist", said Marcos Alvarez, Managing Director, Global Financial Institution Ratings.