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The aviation insurance industry is preparing to face unprecedented claims from aircraft leasing firms trying to recover their planes from Russia, a Bloomberg report said.
Ever since the West started imposing sanctions on Russia over Ukraine’s invasion, insurers have been warned of possible claims by lessors whose jets are stuck in Russia.
According to industry experts, insurers are cancelling some policies and may challenge claims on aviation policies that are still in force to deal with hefty claims.
Marsh global head of aviation and space Garrett Hanrahan said: “The magnitude of potential loss here is staggering. This could potentially be the biggest aviation insurance loss in market history.”
The news comes after Russian President Vladimir Putin amended laws to allow Russian airlines to allow foreign jets to be registered in the country “to ensure the uninterrupted functioning of civil aviation” and “keeping foreign aircraft with Russian carriers.”
Aircraft leasing firms have until 28 March to recover their planes and cancel contracts under the sanctions from the European Union.
According to aviation consultant IBA, foreign firms had leased 509 aircraft to Russian carriers as of 16 March 2022.
Lloyds of London, which is said to provide significant coverage to the aviation industry, is expecting “significant but manageable overall loss”, with claims up to $4bn, the Financial Times reported last week.
Earlier, the UK-based insurance exchange said its exposure to Russia and Belarus amounted to less than 1% of its business.
“The issue with the leased planes in Russia will be a very complex one, as countries don’t normally seize large fleets of aircraft,” Keystone Law partner and aviation lawyer James Healy-Pratt said adding that “the scale of the challenge ahead will be massive and I expect years of litigation between lessors, insurers and underwriters about who pays the bill.”