The Russian government has enacted a swift law to deal with the issue of the 500+ stranded jets within the country.
The new law is an open rebuttal to sanctions imposed on the Russian nation due to its invasion of Ukraine. According to the Russian government, the new law will ‘ensure the stable functioning of the national transport system’.
A statement on the Russian government website said: “The amendments are being made, in particular, in order to ensure the uninterrupted functioning of civil aviation and are aimed at keeping foreign aircraft with Russian carriers. The Federal Law gives the Government of the Russian Federation the authority to establish retaliatory restrictions against aircraft of foreign states that restrict Russian aircraft entry into their airports.”
It added: “In addition, the Law empowers the Government of the Russian Federation to add, among other things, exceptions to the execution of financial lease agreements, foreign aircraft lease agreements, the state registration procedure for civil aircraft, aircraft ownership rights and deals with them.”
Other sources state that the new laws will allow foreign jets to be registered in Russia. Those reports state that 515 jets worth about $10bn are within the country. It is thought that they will be used to fly domestic routes within the country.
Russell Group has analysed the situation, calling the move a ‘hostile act’. It said that the move will deepen the conflict between Russia, Ukraine, and its relationship with the West. The firm also estimated that the cost of the jets will top $13bn (although this was the market rate).
Suki Basi, MD of Russell Group, said: “The nightmare scenario that has kept many of our clients awake at night has now finally happened and it will leave a significant mark on the aviation war market on a par with 9/11. We are stepping up our efforts here at Russell to help our clients through this difficult moment, as it is absolutely crucial for good accurate data that can help an aviation underwriter understand and know their exposures better.”
Reinsurance News has reported on this story in recent days after Bank of America released a note saying that the stranded planes were the biggest issue for aviation lines.
Bank of America wrote: “[…] if the sanctions didn’t void the cover, the insurers often have an ability to pull coverage for specific regions in the event of war for aviation policies. For aviation contingent war covers (policies issued to leasing companies, rather than airlines) there tends to be a 7 day cancellation notice period.”
It added: “According to industry press, notices have generally been sent since the 24th of February up to about a week ago, suggesting that any contingent war covers that can be pulled might have expired by now. For the contingent all-risk covers (issued to leasing companies, with war exclusions) the notice period is typically 30 days. Therefore even if policies have been notified the cover will exist for another couple of weeks.”
There were also questions that Bank of America has raised around when claims can or should be triggered. The bank questioned whether the introduction of sanctions was a trigger, or if the planes had not been returned by a certain point.
