Russia-Ukraine lessor disputes overshadow otherwise stable aviation renewals

Ongoing Russia-Ukraine-related legal action continues to cast a shadow over the build-up to what is otherwise expected to be a stable aviation reinsurance renewal at 1 January.

Sources said that in the absence of any sizeable new claims or further Russia-related losses, the rating environment would likely be stable at 1.1.

The aviation rating environment has moderated throughout 2024, with Aon noting that there has been a stabilisation in insurers’ purchasing requirements and an increase in supply.

This moderation has come during a less unpredictable period for the market than the past two years.

Indeed, many issues have been settled or resolved around prior year loss deterioration, subsequent rate increases, and certain reinsurers’ rather bullish stances on Russia-Ukraine-Belarus restrictions.

Both Guy Carpenter and Aon expect similar available capacity for quota share business at 1 January 2025 renewals. The latter suggested a stabilisation in this element of the market had put less pressure on ceding commissions than in prior years.

The excess of loss (XoL) market continued to harden throughout 2024, said Guy Carpenter.

However, it is expected that reinsurance buyers will attempt to exert downward rating pressure at this year’s renewals. This largely a result of what Guy Carpenter described as abundant capacity in the XoL space.

Stability contingent on outstanding lessor claims question

Brokers highlighted that the long-running uncertainty stemming from the multi-million-dollar aviation lessor disputes is finally being addressed at the High Court in London.

“Until respective courts deliver their judgments, both the insurance and reinsurance markets continue to wait on key questions, namely policy coverage, quantum, date of loss and whether multiple lessors’ claims may be aggregated,” said Guy Carpenter.

Aon said: “Given the values at stake, this could result in very meaningful potential impacts to 2025 placements.”

As previously reported, AerCap is seeking a payout for 116 aircraft and 15 standalone engines which are currently in Russia.

The lessor – which first issued a claim against its insurers in June 2022 – is seeking $2bn under its all-risk policy and circa $1.2bn under its narrower war cover. The lessor had originally sought $3.2bn under its all-risks cover but this figure has reduced following a number of settlements with Russian airlines.

AerCap began its trial – alongside a number of other lessors including Dubai Aerospace Enterprise and Merx – at the High Court in London on 2 October. This case will determine the quantum insurers must pay and, critically, which element of the aviation market claims will fall under.