Padraic Halpin

DUBLIN, (Reuters) – The potential huge insurance claims that could be related to Russian aircraft lease cancellations is leading to “horrendous” increases in renewal costs for policies, according to BOC Aviation Ltd’s chief executive.

After a deadline of March 28, when contracts were due to be cancelled in accordance with Western sanctions, over 400 planes leased by Russia for almost $10 million remained. Lessors faced heavy writedowns and a lengthy insurance battle.

BOC announced Thursday’s trading update that its net book value for the 17 owned aircraft it is currently recovering from Russia, net of any cash collateral held to respect the aircraft was $589 million. This was 2.5% of its total assets.

It added that all letters of credit for the aircraft were drawn successfully.

Robert Martin, an aviation expert said that there will be a lot of claims this year on the insurance for theft or confiscation. If they aren’t returned, it could have a negative impact on insurance costs.

This is an unforeseen circumstance that will hit us later in the year. I am hearing horrendous numbers about some near-term renewals due at March’s end. We won’t be leaving until next January, fortunately.

AerCap, the world’s largest aircraft lender, announced last week it had filed a $3.5B insurance claim to cover more than 100 Russian jets that were stuck in Russia. This was the biggest exposure of the sector.

Martin from BOC said that the implications of the fight ahead could force the aviation industry to rethink its insurance business and emphasize the importance of not concentrating too heavily on one market.

Martin claimed that BOC took out “some” of its Russian-managed aircraft. According to the Singapore-based Lessee, one of its 17 aircraft is still in Russia.

We will keep taking the other plane out slowly. Martin explained that negotiations are the only way to go. Martin also said that he felt sorry for Russian customers.

Insurance claims will be filed for any issue that isn’t resolved.