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Aircraft insurance rates have surged, following the situation with aircraft confiscated and nationalized by the Russian authorities. Robert Martin, managing director and CEO of BOC Aviation, told the CAPA Aviation Leader Summit in Manchester that the effect is already visible short-term in contracts. Aircraft insurance rates on a surge following situation in Russia.
“Because there are going to be huge claims on these insurances this year for confiscation or theft if the aircraft aren’t given back, this will then have a knock-on effect on insurance costs. Insurance rates for renewal in March and April have really gone up, there are horrendous hikes. We at BOC Aviation, fortunately, don’t go until January next year”, Martin said during a panel discussion.
Following the invasion of Russia in Ukraine on February 24, the European Union, the UK, the US, and Singapore imposed sanctions on Russia that forbid trading in aircraft and parts. Russia retaliated by confiscating and nationalizing over 400 aircraft owned by non-Russian lessors that were still in the country and re-registering them into its own register. On March 31, deputy prime-minister Borisov repeated that all aircraft owned by Western lessors will stay in Russia. He added that they had all been insured by Russian insurers.
The rising rates seem to reflect the nervousness about this situation. AerCap said last week that it has already submitted a $3.5 billion insurance claim for 113 aircraft that are still in Russia, with Air Lease Corporation indicating it will do the same. These claims are expected to result in very lengthy procedures and will take years to be settled, if ever. This situation is reflected in rapidly rising insurance rates, although the situation in Russia should not have any effects on insurance policies in other regions.
BOC Aviation reported today that it still has seventeen owned and one managed aircraft in Russia, out of the original 23. The lessor says that the aircraft are “in the process of being recovered”, without saying how it plans to do this. BOC Aviation has put a net value of $589 million on the confiscated aircraft, which represents 2.5 percent of all assets. It adds that all credit letters have been drawn.
Avolon said in its Q1 update that ten aircraft are in Russia. As reported earlier, one aircraft had just been returned to the lessor and three were outside Russia for maintenance when the war in Ukraine started on February 24. The ten aircraft represent only one percent of its portfolio value.
