Russian grab for foreign jets spurs jump in insurance claims

Russia’s move to transfer almost 800 foreign-owned jets to its own aircraft register amid foreign sanctions has triggered a wave of insurance claims from leasing firms whose fleets have effectively been commandeered. Lessors will assert that registering the planes in Russia when they’re already on the books in other territories amounts to a qualifying event for claims, including under their war-risk policies, according to people familiar with the situation who asked not to be named as the proceedings are confidential. While some notices had already gone out, the effort to re-register planes in Russia has given the process impetus, the people said. Fitch Ratings puts the insured residual value of aircraft held by Russia following its invasion of Ukraine at $13b, though with aggregate loss limits claims may be limited to $10b. That would still be by far the largest sum in the history of aviation insurance, it said. In a separate report, Moody’s Investors Service estimates up to $11b in losses. A number of the initial claims were made under so-called hull loss policies that kick in if a whole plane is written off, as if it had crashed or disappeared. The prospect of having a stronger case offers some encouragement to a jet-leasing sector that has the green light to repossess aircraft under international sanctions but no realistic way of doing so. At the same time, the value of the jets is likely to tumble as a moratorium on shipments of approved spare parts leads airlines to resort to non-standard maintenance. Insurers could still haggle over the size of payouts since Russia continues to recognize lessors’ ownership of the jets, according to the people. “It is unclear at this stage whether insurers will have to pay all these claims,” Moody’s said, citing a number of variables including the prospect of negotiations with airlines.<br/>