As Russia’s unprovoked invasion of Ukraine continues, hopes of a global aviation insurance market recovery have faded somewhat, with the 2022 renewals set to present “another complex engagement,” according to re/insurance broker Gallagher.
After two years of pandemic-related stress and multi-billion dollar industry losses, the start of this year suggested a recovery for the global aviation marketplace.
Gallagher notes that as 2022 began, passenger levels were approaching 2019 levels, or in some instances exceeding, leading to optimism across the industry as players eyed a return to profitability.
However, as the market moves through Q2, Russian President Vladimir Putin’s decision to invade Ukraine and the resulting geopolitical uncertainty has created a renewed sense of uncertainty, “casting a shadow over the optimism around recovery.”
Western nations have imposed an array of sanctions on Russia designed to cripple its economy, and Gallagher notes that these actions pose significant logistical and financial challenges to airlines, aerospace firms, and lessors and financiers.
Reports suggest some 400 Western planes are still in Russia, with some commentators suggesting a possible loss of $10 billion if they cannot be repossessed.
The Kremlin has said that all Western planes still in Russia following the termination of leasing contracts in March will remain in the country indefinitely, while the country has plans to nationalise Western-made planes grounded within its borders. If this move goes ahead, analysts feel it could be an historic loss for the re/insurance industry.
Commenting on the implications for the insurance industry, Gallagher says that in such a rapidly developing situation, it’s not possible to predict how things will play out.
“Regardless, 2022 renewals look set to present another complex engagement,” says the broker.
Looking ahead, Gallagher expects to see a continuation of the current trend in the aviation insurance market, albeit with some upward pressure on pricing, notably related to War and Excess War TP business.