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Planes stranded in Russia could lead to industry losses topping 9/11

20th June 2022 - Author: Pete Carvill

The aggregate value of planes stuck on Russian territory following the nation’s invasion of Ukraine could even surpass the claims stemming from 9/11, according to a new note from WTW.

Russia imageThe firm said that while the impact of the invasion was still unknown on the aviation industry, it said that there was ‘little hope of recovery’ for the billions of dollars in aviation assets that remain in Russia. In a more-general overview, WTW said that rate increases continue to decelerate with more capacity entering the marketplace alongside some new insurers trying to obtain a portion of the inflated premium base.

Regarding airlines, WTW wrote: “Underwriters are expected to make money in 2021 despite a slight softening in the market toward the end of the year. Worldwide claims were not significant, despite a large hail loss for several domestic airlines, which did not turn out as bad as first forecast. Rates and premium saw downward pressure as capacity expanded slightly due to increased appetite from underwriters, who focused on maintaining their premium base rather than applying rate increases. We expect some buyers will see modest decreases in 2022.”

Following the Russian invasion of Ukraine, It is understood that more than 500 planes were left stranded in Russia after the country began to invade Ukraine earlier this year. A law passed by the Duma in March allows for the state to effectively nationalise the aircraft to ‘ensure the stable functioning of the national transport system’ by allowing the vehicles to be certified and registered within the country.

At the time, Berenberg said that the situation was the greatest risk to the London insurance market, given that the planes are valued at over $10bn. It was a view reflected at the same time by Bank of America.

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Meanwhile, around the rest of the market, WTW said that hard market conditions are prevailing for banks and aircraft lessors, but rate increases were starting to plateau.

It wrote: “Insurers continue to assess exposure and liabilities to Ukraine, Russia and surrounding areas. Combined impact of the Ukraine crisis and developing airline assets held in Russia may have a far-reaching impact on this class.”

However, it said that overall market capacity remains adequate, particularly for profitable insured with a growing fleet. Despite the increase continuing to decelerate, it said that underwriters are still looking for an uplift in rates.

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