Reuters is reporting that aircraft leasing companies are filing billions of dollars in insurance claims trying to reclaim the value of about 100 airliners that have been effectively seized by Russia. The companies say they have little hope their Russian customers will ever give back the planes they have leased since the Monday deadline for returning them passed. Since all parts and maintenance supplies have been cut off, they probably won’t want them back, either. Rather than suck up those losses themselves, the leasing companies are invoking the act-of-war-protection in their policies and trying to push those losses to the insurers. The legal wrangle that will ensue will take years.
The biggest claim is from Dublin-based AerCap. “Last week we submitted an insurance claim for approximately $3.5 billion with respect to our aircraft and engines remaining in Russia,” Chief Financial Officer Peter Juhas told investors in an earnings call. “In this case we expect them to be contested, just given the large sums involved across the industry.” AerCap had 135 aircraft and 14 engines in Russia but managed to repossess 22 planes and three engines. It is, however, a small fraction of AerCap’s portfolio. Reuters says the company has 3,701 aircraft, engines and helicopter leased out all over the world.
Ah, the credit-worthiness of despot nations, and the fools who lend them money – or insure them.
This isn’t going to end well, for anyone.
Except the lawyers, of course. If lawyers had the same consequences for poor skills that pilots do, the world might be a better place.
It’s funny because it’s true.
With that said my girlfriend is a physician who is also a bar certified attorney so some lawyers are good and important people. There are bad apples in every profession including my own.
Why don’t they send in those aircraft repo guys?
And now our Insurance premiums will go up even more. Thanks Vlad!
Blaming Vlad is like blaming Bush for 9/11.
It was the Democrats. Go review the history of Ukraine over the last 20 years and Democrat involvement.
The US would have done the same thing… only Russia wouldn’t cut off trade.
I guess the streak of not having pointless political comments here has been reset to zero again. 🙁
Who knows where things will stand globally years from now. As much chaos as there is in the world, no one has a clue as to what could happen.
I know.
It WILL get worse.
Read Revelation. Bad times ahead but spoiler alert. The good guy wins.
When you elect a brain dead President and an emotionally unstable VP…
Yea, bad things are going to happen. I lost a business because Obama was elected. We saw it coming and closed before being bankrupted from his idiocracy.
This hyper inflation will not be good for aviation.
Senseless comment.
Richard, please save your political comments for your next Trump rally. No one here wants to hear them.
Can you reveal who’s holding the gun to your head, forcing you to read others’ comments?
I’d like to know, so I can be on the lookout. Thanks.
It’s sad, but it’s inarguable that the powers that be have returned to the centuries old formulae: incestuous ruling class lording control over their serfs by “official decrees”.
No proof whatsoever that the lords are concerned about the fate of pawns.
Can you say subrogation? The insurance companies will probably pay and then go after Russian assets to recover the losses or sue various Russian entities who are responsible. Do not underestimate the power and tenacity of insurance companies and their lawyers. Besides, this is what insurance is for and why we all pay the premiums.
Anyone want to guess how long it takes for the cost of this to be passed along to GA aircraft owners? Last year’s rising premiums and policy cancellations for older pilots resulted in part from insurance industry losses in totally unrelated areas: wildfires, hurricanes, COVID. I have to wonder how many more of us will be impacted by this latest huge industry loss.
I’m usually as skeptical as anyone, but I’m not sure this will affect us. I think it’s likely different companies, and I’m pretty sure our contracts wouldn’t cover us for this kind of loss anyways.
Eric, your comment makes sense, but I do have to wonder about the possibility of what StephenLeonard describes, based on what we saw in recent years. I got the impression there is a sort of ripple effect, as underwriters seek to cover losses/protect profits in any way possible. Could someone in the aviation insurance industry chime in?
As I understand it, insurance companies themselves buy insurance against losses. This is known as “reinsurance”.
So when hurricanes and wildfires devastate large swaths, it’s not just “Flo” and the “Good Hands” people who pay for the losses. They go to their reinsurance companies. Put several natural (or man-made) disasters together around the world and the reinsurance market takes a real hit.
This is part of the reason behind the high(er) rates for aviation insurance. The reinsurance companies raise their rates and it trickles down. Combine that with other companies exiting the aviation market due to low profits, more expensive repairs, etc., and you have what we’ve got today. Like many problems in life, there’s no one cause or silver-bullet solution, but rather a series of steps, some bigger than others.
Back to today – paying for ‘hull-losses’ on unrecoverable airliners will certainly impact the reinsurance market. The question is how much, and what other losses may happen as well (natural or man-made disasters)?
My WAG is that it won’t raise GA insurance rates. But they’ll probably stay higher for longer than expected.