Aircraft lessor BOC Aviation has initiated legal proceedings against insurers over aircraft stranded in Russia. The lessor is the latest company to launch legal action as it attempts to recoup losses in the hundreds of millions. Let's take a closer look at this story below.
BOC Aviation files lawsuit against insurers
The leasing firm's lawsuit involves 16 insurance companies, including Swiss Re, Chubb European Group, Lloyd’s of London, and AIG Europe. The company filed its case to the Irish High Court on November 3rd but did not provide further details on the size of its claim.
In an earnings update in August, BOC Aviation valued its 17 planes trapped in Russia at over $800 million, noting that it was unlikely to recover the aircraft "in the foreseeable future, if ever." BOC Aviation CEO Robert Martin added,
"These have impacted lessors and our insurers and will keep lawyers busy for many years. This may require a complete rethinking of aviation insurance."
BOC Aviation's portfolio, including the 17 planes in Russia, stood at 412 owned aircraft as of September 30th, with its trapped aircraft amounting to just over 4% of its fleet. According to ch-aviation, the company's Russian customers include Pobeda Airlines, which leased eight Boeing 737-800s, and S7 Airlines, which has three Boeing 737-800s and two Airbus A320s.
Another lessor seeking restitution
BOC Aviation is the latest aircraft lessor to seek restitution regarding planes trapped in Russia, joining major firms including AerCap, Carlyle Aviation and Avolon.
By far the largest claim comes from leasing giant AerCap, which has over 100 planes stuck in Russia to the tune of $3.5 billion, followed by SMBC's $1.6 billion claim involving 34 stranded aircraft. As Simple Flying reported earlier this month, Carlyle Aviation is seeking $700 million from more than 30 insurers.
Following Russia's invasion of Ukraine in February, aviation lessors found themselves in an unprecedented situation with hundreds of aircraft stuck in Russia. Out of Russia's 980 active passenger aircraft at the time, 515 were on lease from foreign firms, including hundreds from Irish lessors such as AerCap, SMBC and BOC Aviation.
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Could insurers even pay up?
Even if lessors were to win their lawsuits, there's no guarantee they would receive the full amount. According to US-based credit rating agency Fitch Ratings, claims from aviation lessors could reach around $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 total insurance claims would be more than "two to three times the size of every insurance dollar paid to the insurance industry in the world for all of aviation."
Should insurers be forced to make large payouts regarding these claims, they are almost certain to push up premiums and add more exclusion clauses to future agreements. One thing is for certain - lessors won't be working with Russian carriers for the foreseeable future after this debacle.
Do you think insurance companies should be liable for trapped aircraft in Russia? Let us know your opinions in the comments.
Source: Fitch Ratings, FLYING, Reuters