UK high court hands down judgement in aircraft leasing court case

The UK High Court handed down its judgement on aeroplanes stranded in Russia following the invasion of Ukraine in February 2022. At its heart was a dispute between aviation hull insurers and aviation war insurers as to the cause of loss to the companies that leased the aircraft to Russian airlines. This followed legislation by the Russian government banning the export of aircraft from Russia. 

In a 350 page verdict, Lord Justice Butcher found that claimants (the leasing companies) can recover under war risk policies and not from all risks hull policies. The judgement also determined the date of loss to be 10 March 2022, the date Russia passed the legislation. 

This is a highly complicated case, and a large number of syndicates have exposure, either to all risks policies, war risks, some contingent protections and the reinsurances of the original programmes. Syndicates have reserved on a probabilistic basis, assigning different probabilities to different outcomes to arrive at a blended reserve for the event.

While the outcome will help to clarify reserving, and reduce uncertainty in parts of the probabilistic models, there has also been an acceleration in negotiated settlements in the second half of 2024 and first quarter of 2025. Some uncertainty remains, especially with regards to the operation of excess of loss reinsurance programmes, and at least one insurer has suggested that it will appeal the outcome. 

Given the complexity of the case and the detail provided in a very lengthy judgement, we expect that impacted syndicates will review reserves in conjunction with their legal advisers as part of the second quarter reserving process.