Aircraft lessor BOC Aviation has begun legal action against insurers for planes stranded in Russia. The renter is the latest company to launch legal action while trying to recover losses in the hundreds of millions. Take a closer look at this story below.
BOC Aviation will file a lawsuit against the insurers
The leasing industry’s lawsuit includes 16 insurance companies, including Swiss Re, Chubb European Group, Lloyd’s of London, and AIG Europe. The company filed its case in the High Court of Ireland on November 3 but gave no further details on the extent of its claim.
In a financial update in August, BOC Aviation valued its 17 aircraft seized in Russia at more than $800 million, saying it may not be possible to recover the aircraft “in the future, if not.” BOC Aviation CEO Robert Martin added,
“These have affected lessors and our insurers, and will keep lawyers busy for years. This should also be considered in aviation insurance.”
BOC Aviation’s portfolio, including 17 airports in Russia, stood at 412 aircraft as of September 30, with its aircraft holding more than 4% of its fleet. According to ch-aviation, the Russian company’s clients are Pobeda Airlines, which has leased eight Boeing 737-800s, and S7 Airlines, which has three Boeing 737-800s and two Airbus A320s.
Another tenant is seeking compensation
BOC Aviation is the latest aircraft leasing company to find leased aircraft in Russia, joining major firms including AerCap, Carlyle Aviation and Avolon.
The largest claim came from the super-leaser AerCap, which has more than 100 planes stuck in Russia worth $3.5 billion, followed by SMBC’s $1.6 billion claim for 34 stranded planes. As Simple Flying reported earlier this month, Carlyle Aviation is seeking $700 million from more than 30 insurance companies.
After Russia invaded Ukraine in February, airline charterers found themselves in an unprecedented situation with hundreds of planes stuck in Russia. Of Russia’s 980 active aircraft at the time, 515 were leased from foreign companies, including hundreds from Irish lessors such as AerCap, SMBC and BOC Aviation.
Can insurers pay?
Even if the lessees win their lawsuits, there is no guarantee that they will receive the full amount. According to US credit rating agency Fitch Ratings, claims from aircraft lessees could reach $10 billion in a worst-case scenario and $5-6 billion in a realistic scenario.
Bill Behan, CEO of Assured Partners Aerospace, told FLYING Magazine in March that insurance claims will exceed “two to three times as much per dollar of insurance paid to an international insurance agency for all aircraft.”
If insurers are forced to pay more for these claims, they are sure to raise premiums and add more exclusion clauses to future agreements. One thing for some – the lease holders will not work with Russian carriers in the future after this problem.
Do you think insurance companies should be held responsible for planes caught in Russia? Let us know your thoughts in the comments.
Source: Fitch Ratings, FLYING, Reuters