A Landmark Judgement – Russia/Ukraine Claims Update

On 11 June a landmark judgement was made in the UK High court that ruled that the losses incurred by lessors as a result of the aircraft seized by Russia following the invasion of Ukraine, were to be covered under Hull War policies as opposed to Hull All Risks.

The following article looks at what impact, if any, it may have for the buyers’ of hull insurance in the airline market.

Background

Following the Russian invasion of Ukraine in February 2022 sanctions were imposed by the UK and Europe that subsequently prevented aviation lessors from leasing aircraft and engines to Russian owned airlines. Requests from lessors to retrieve the circa 500 aircraft affected, after notices were issued, were in the most part denied and the majority of these assets have since remained in Russia.

Following a law passed by President Putin in March 2022, Russian authorities were able to re-register the held aircraft and issued their own certificates of airworthiness, after western aviation authorities had revoked them. These events led to the lessors seeking recoveries from the aviation insurance market.

This proved problematic for the lessors looking to recover, what was set to be the largest loss the aviation insurance market has ever incurred. The London Insurance market was  in dispute as to whether any losses should be covered by the lessors’ Hull War risk or All Risk policies. As such, insurers refused to pay until this critical piece of information could be determined.

The course case

Aercap, followed by other lessors, subsequently then sued insurers in order to seek a resolution and recover losses they believed they had incurred as a result of this event.

The court, given the complexity and quantum of claims, has taken a number of years to reach a conclusion, but in June 2025 issued it’s findings. It found that on 10 March 2022 the aircraft had been ‘lost’ after the Russians banned the export of the aircraft from Russia, thus meaning that lessors should in turn seek any insurance recoveries from the Hull War market.

What does this mean for the aviation insurance market?

The decision made by the High Court judgement, is unlikely to have taken many insurers by surprise.

While insurers required clarity as to where these claims were to fall, there was a general view in the market that it was more likely to be covered under Hull War policies. Therefore, with plenty of time to prepare and the decision going the way the majority would have predicted, we would expect the insurance market to be well equipped to respond to the ruling.

The Hull War market has already seen large increases in rates and related premiums since 2022. Albeit some may argue that this was in relation to other losses, such as the aircraft destroyed on the ground at Khartoum airport Sudan, but it is difficult to argue that the potential losses relating to the Russia/Ukraine conflict haven’t already been factored into the equation, especially for the buyers of contingent Hull War insurance. Off the back of these increases there have been new entrants into the Hull War market (as well as a return of some who initially pulled out) seeking to take advantage of the elevated rating environment. This is turn has increased competition and could dampen any attempts for those underwriters hoping to recover claims payments by further pushing up rates/premiums.

For insurers who had potential exposure in both the Hull All Risk and Hull War markets, the ruling will no doubt be seen as the lesser of the two evils, given the aggregate limits imposed on Hull War will restrict the amounts that can be claimed compared to the hull/contingent policies.

It is also worth noting that while this is a major decision, the ruling concerned less than 150 of the circa 500 that were “lost”, with many aircraft having already been purchased by Russian entities and others resolved by way of undisclosed settlements with insurers, thus significantly reducing the quantum of claims to the insurance market.

This ruling will not suit all however, with lessors potentially facing restricted recoveries owing to aggregate limits and Hull War insurers who feel that there is still a case for the claims to fall elsewhere, so there is still potential for appeals being made against this judgement. Following this ruling there is also some debate as to how reinsurers will react, especially with regards to the out of court settlements that were made prior to the decision being made.

While we don’t expect a major shift in market conditions off the back of this ruling the sums involved will be impactful and the coming months will see the market reaction evolve.

Paul Mitchell
Director

Price Forbes 
Paul.Mitchell@priceforbes.com  
T: +44 20 7816 5691