Russian aircraft heist could spell $11bn insured loss: Moody’s

Global re/insurers could face between $9 billion to 11 billion claims bill following Russian expropriation of leased aircraft, a dent to earnings, but not likely to capital, analysts at  Moody's said in a report.

Losses could be spread quite unevenly. While some major global players may be big in aviation covers, that business will still be small relative to their total book. Select specialty insurers, in turn, might yet reveal more shocking numbers, Moody's warned.

"The impact may vary widely by company, and could be more severe for specialized players," analysts wrote.

Moody's tally came in below estimates revealed one day prior by Fitch. Fitch put the likely insured loss at $6 billion on the $13 billion worth of aircraft grounded in Russia. Aggregate limits should hold the figure well below Fitch’s worst-case scenario estimate of $10 billion.

Varying views to reinsurance cover also account for a part of the discrepancy. Moody's claims that 20-30% of the business is ceded to reinsurers but believes reinsurers pay an even higher proportion of claims. Fitch had estimated 30-40% of the business is ceded.

But reinsurance cover is far from settled. "Given the complexity of this event, disputes between insurers and reinsurers are also likely, further delaying the settlement of claims," Moody's noted.

Wildcards still in play include policy cancellation timings (before or after deadlines vis-a-vis the Russian grounding and expropriation law) and how the trigger event is eventually defined, Moody's analysts wrote.

That too could go to court, where ties often go to the client, Moody's warns. "Ambiguous language in insurance policies frequently leads to courts deciding in favor of policyholders," analysts wrote.

"We believe lessors are ready to start legal proceedings against insurers if necessary."

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