Insights

AerCap reaches a settlement for 17 aircraft and 5 engines seized by Russia

Posted 07/09/2023 – Quick takes

AerCap, the world’s leading lessor of aircraft has reduced its aviation all-risk insurance claim to $2.75bn as it receives $645m from NSK (the Russian state backed insurance company) in relation to the trapped aircraft in Russia following the Russia/Ukraine conflict. The $645m settlement payment from NSK is on behalf of Aeroflot (Russia’s largest airline) and is compensation for the 17 aircraft and 5 engines which have been seized by the airline. A statement from Aeroflot said that they are also in talks with other leasing companies about potential settlements. Given that this settlement was agreed by both US and Russian authorities, it could pave the framework for future deals with other lessors and give an indication as to the reasonable monetary value for which a settlement can be agreed. An expert reported that the deal agreed reduced the insured loss to 25% of the original claim size. Claims currently total circa $10bn, and by following the framework the total claim size could be reduced to $2bn-$2.5bn. Furthermore, AerCap’s premarket share price increased by 5% after the press release.

Bruce Carnegie-Brown, Lloyd’s chairman, commented on the settlement saying it was “a very positive development … that helps to mitigate the losses of our customers and potentially, ultimately by the Lloyd’s insurance market. It would be ideal if that was the start of a pattern of Russian insurance companies settling those claims.”

Alpha comment

Although there is still a significant degree of uncertainty with over 400 western planes still trapped in Russia as a result of the Russia/Ukraine conflict, this settlement could be the first of many. The specific types of aircraft were not released in the press statement, however the suspicion within the market is that the planes involved in this settlement are likely to be some of the higher value and better maintained, and therefore the level of settlement was more easily achieved. Any settlements, that can be agreed outside of court, should benefit our syndicates both in terms of potential claims cost and to alleviate significant legal fees. Therefore we would expect that the settlement is probably a good piece of news for members.

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