Reinsurance News

Stranded aircraft lessor brings $3.5bn lawsuit against AIG

14th July 2022 - Author: Matt Sheehan

Aercap, the largest global aircraft leasing firm, has sued AIG and other insurers including Lloyd’s business Atrium over planes stranded following the outbreak of conflict between Russia and Ukraine, according to reports from City A.M.

aviation-and-airportsThe lawsuit follows a $3.5 billion all-risk claim filed in March over aircraft lost in Russia, which the lessor’s insurers refused to pay out on.

Aercap argues that its insurers were in breach of policy by refusing to honour its claim, and is now seeking to recoup its losses in court.

The lessor posted a $2.7 billion net loss in the first three months of 2022 after 113 of its jets and 11 engines remained stuck in Russia, City A.M. reports.

It’s thought that, to date, more than 400 foreign-leased planes worth $10 billion still remain in Russia after the country moved to nationalise vehicles left in its territory, in response to Western sanctions.

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Analysts believe that the outcome of the lawsuit will ultimately come down to whether the court decides that Aercap’s losses fall under its all-risk and war policy or not.

It was reported back in May that Lloyd’s of London had hired law firm Clyde & Co. to advise it on issues relating to the Russian and Ukrainian conflict, ahead of any potential legal battles.

Lessor company Air Lease Corporation also revealed back 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 $802.4 million.

And more recently, SMBC Aviation Capital, has said it is “unlikely” that it will be able to recover 34 owned aircraft stranded in Russia following the country’s ongoing invasion of Ukraine and subsequent sanctions, leading the company to recognise a $1.6 billion write-off.

Estimates for ultimate insurance market losses from the aviation crisis range from between $10 billion to $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.

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