AerCap law suit turns spotlight on all-risk and war policies

22 September 2022

Dublin based AerCap, the world’s largest aircraft leasing firm, has launched a law suit in London’s High Court in an attempt to establish if a Euros 3.51 billion ($3.5 billion) insurance claim falls under its all-risk and war policy.


The claim centres around AerCap’s ongoing attempt to recover assets trapped in Russia following the instigation of sanctions triggered by President Vladimir Putin’s invasion of Ukraine.


The case is being closely followed to see if the court rules Aercap’s losses fall under its all-risk and war policy or not. AerCap, which has offices in Shannon, Miami, Singapore, Amsterdam, Shanghai and Abu Dhabi, has assets of Euros 70.2 billion ( $70 billion) including 1,800 aircraft, 300 helicopters and 900 engines.


AerCap customers include American Airlines, China Southern Airlines, Air France, Azul Brazilian Airlines and Ethiopian Airlines.


The $3.5 billion all-risk claim was filed in March over aircraft lost in Russia with AerCap arguing its insurers were in breach of policy by refusing to honour its claim. It has been reported that the lessor posted a Euros 2.7 billion($2.7 billion) net loss in the first three months of 2022 after 113 of its jets and 11 engines remained in Russia.


It is estimated that more than 400 foreign-leased planes worth Euros 10 billion ( $10 billion) still remain in Russia after the country moved to nationalise vehicles left in its territory following the introduction of sanctions after the invasion of Ukraine.


Air Lease Corporation revealed in April that it expected to record a total write-off of its interests in its owned and managed fleet that remain in Russia, totalling approximately Euros 804.8 billion ($802.4 million).


SMBC Aviation Capital said it is “unlikely” that it will be able to recover 34 owned aircraft stranded in Russia leading the company to recognise a Euros 1.604 billion ( $1.6 billion) write-off.


Estimates for potential insurance market losses from the aviation crisis range from between Euros 10 billion ($10 billion) to Euros 35.1 billion ( $35 billion), with some commentators warning that industry losses could top levels seen after 9/11, with price increases of 30-40% expected to follow.


War is typically excluded from mainstream insurance policies, however, businesses can buy extra war cover. War risk insurance covers damage due to acts of war, including invasion, insurrection, rebellion and hijacking. Some policies also cover damage due to weapons of mass destruction and is most commonly used in the shipping and aviation industries.


W Denis place insurance around the world and have direct access to Lloyd’s as well as other international (re)insurance markets, if you wish to discuss your insurance requirements, please visit www.wdenis.eu or contact Vida Jarašiūnaitė vida.jarasiunaite@wdenis.eu or Mark Dutton mark.dutton@wdenis.com

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