High Court rules in favour of AerCap for $1bn insurance payout

In a landmark judgement, the High Court has ruled that insurers including AIG, Lloyd’s of London, and Chubb must pay more than $1 billion to AerCap, the world’s largest commercial aircraft lessor, for planes stranded in Russia since the beginning of the war in Ukraine. The case represents one of the largest awards in a UK insurance dispute.

The ruling follows a three-year legal battle after AerCap, alongside other lessors such as Dubai Aerospace Enterprise, Merx Aviation, and KDAC Aviation, were forced to terminate leases when Russian operators refused to return the aircraft. AerCap, which is headquartered in Dublin and listed on the New York Stock Exchange, brought a claim involving 116 aircraft and 15 engines. Russian legislation banning the export of aircraft and equipment in March 2022 cemented the losses.

Delivering the 230-page judgement, Mr Justice Butcher determined that the losses could be recovered under “war risks” insurance policies rather than broader “all risks” coverage. While the payout is below the initial $2 billion sought by AerCap, the court’s decision secured $1.04 billion for the company, with additional recoveries achieved in prior settlements. The indemnity payment is to be made by 2nd July, with costs and interest yet to be resolved.

Legal professionals noted that despite the complexity of the case, the insurers were not exempt from meeting their obligations, even under retaliatory sanctions from the European Union or the United States. Alexander Oddy, a partner at the law firm Herbert Smith Freehills acting for AerCap, stated the ruling reinforced the significance of insurance in uncertain global times and the need for insurers to uphold their responsibilities.

AerCap’s pre-tax recoveries linked to the conflict in Ukraine are now expected to total around $2.5 billion. The company has seen significant growth in share value, with its stock rising nearly 80 per cent since the war began, despite initial sell-offs in the aftermath of the invasion.

While KDAC settled its claims during the trial, other lessors involved are also in line for payouts under their “war risks” insurance policies, though the final amounts are still to be determined. The ruling is a critical example of the role of insurance in addressing the risks presented by geopolitics.