Disputes with insurers
Billion dollar trouble over planes stranded in Russia
October 1, 2024, 12:55 p.m
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The aviation insurance industry may be facing the biggest loss in its history: plane owners are suing insurers who fail to pay compensation for planes stranded in Russia after the attack on Ukraine. It’s several billion dollars.
A multi-billion dollar legal battle begins in London this week over who will cover the cost of hundreds of planes stranded in Russia, the Financial Times reports. Accordingly, the owners of the aircraft are suing their insurance companies for compensation. The insurance groups AIG, Chubb and Lloyd’s of London are among those affected. They have all refused to provide insurance coverage to owners of Boeing and Airbus aircraft stranded in Russia after the attack on Ukraine.
The world’s largest leasing company for commercial aircraft, AirCap, is among the owners who are suing. The company is demanding a total amount of around three billion US dollars from its insurers. The Financial Times believes the aviation insurance industry may be facing the biggest loss in its history. The amount of damage could be even greater than after September 11, 2001.
More than 500 planes, worth an estimated $10 billion, have been stranded in Russia since the invasion of Ukraine in February 2022. At that time, some leasing companies managed to get their aircraft back. However, most of them remained in Russia – and are still flown by Russian airlines to this day.
According to the Financial Times, the insurers’ lawyers will argue that it is too early to claim a total loss. Not least because the aircraft were not destroyed and could still be retrieved. They could also point out that the war between Russia and Ukraine could still be resolved.
“Overall it’s a very bleak picture”
The court is not only faced with the difficult task of having to determine whether the aircraft rental companies have insurance cover. You also need to determine which policy applies: war or all-risk insurance. The latter protects against all damages that were not expressly excluded in the small print. To do this, the judge will determine the legal cause of the loss and clarify the question: Were the planes confiscated by the Russian state or stolen by the airlines?
The aircraft rental company AirCap has already reached settlements with a number of Russian airlines and their insurers in the past. In 2023, he recovered a total of $1.3 billion. The insurers previously blocked any claims for compensation citing the war.