Air sanctions against Russia for the West could result in decades of litigation between lessors and insurers. This is how aviation experts assessed the situation. “The scale of the potential damage here is staggering. Potentially, this could be the biggest loss from aviation insurance in the history of the market,” said Garrett Hanrahan, global head of aviation and space insurance broker Marsh, Marsh McLennan
It will be recalled that leasing companies wishing to reclaim Russian airlines must terminate their contracts by March 28 in accordance with European Union sanctions and broader banking bans. Since Russian airlines will not give planes to lessors in accordance with the decrees of the President of the Russian Federation, leasing companies are beginning to prepare the ground to cover their losses with the help of insurers, and those in turn – the account of reinsurance companies. And none of them wants to pay and tries to find loopholes to minimize harm to themselves. As a result, everyone can go bankrupt.
The following figures are as follows: as of March 16, foreign lessors leased 509 aircraft to Russian operators. So far, the owners have been able to return – a total of 14 planes have been arrested abroad.
According to James Healy-Pratt, aviation lawyer and partner at Keystone Law in London, “The scale of the future problem will be huge, and I look forward to years of litigation between landlords, insurers and underwriters over who pays the bill,” he said. He noted that only a few “hijacked” planes during the Iraq-Kuwait war led to decades of scrutiny. Here the scale is incomparable and there will be real battles.
The first process, by the way, has already taken place. Landlord BOC Aviation Ltd, based in Singapore. He sued Russia’s AirBridgeCargo Airlines LLC this week over a Boeing Co. plane currently based in Hong Kong. BOC Aviation claims that the cancellation of the reinsurance policy led to non-fulfillment of obligations under their lease agreement, which allowed to return the aircraft to possession. “As a result of the canceled and invalid insurance, BOCA terminated the lease of the aircraft and exercised its contractual right to demand the immediate return of the aircraft with all necessary documents,” BOC Aviation claims in the lawsuit. “However, AirBridge refuses to accept the termination of the lease and refuses to return the documents. Instead, he demands that BOCA allow the plane to fly from Hong Kong to Russia.”
Some experts hope that the situation will be resolved quickly. According to Hanrahhan of Marsh, if leasing companies can successfully return all their aircraft from Russia, any claims may disappear. Lloyd’s of London’s dominance in the reinsurance market may also drop lawsuits, as revoked policyholders refrain from suing the main insurance provider for fear of being excluded from business processes, say people familiar with the matter. Lloyd’s of London, the world’s largest insurance exchange, said Russia and Belarus accounted for less than 1% of its business. According to them, the exchange offers coverage of losses or damages, as well as liability policies and a special type of confiscation insurance for aviation.