A significant decision has been handed down in what is widely regarded as one of the most consequential insurance cases in English legal history. The Commercial Court ruled in favour of aircraft lessors in the high-profile Russian aviation insurance dispute, determining that insurers must provide compensation under ‘war risk’ insurance for aircraft stranded in Russia following the 2022 invasion of Ukraine. The case involves multiple aircraft and engines, with insured values of over $4.5 billion, annexed by Russia in response to international sanctions.  

Read the full judgment here. 

Determining ‘War Risk’ Damages  

This ruling has created significant waves through the aviation leasing and insurance industries emphasising the complex challenges and geopolitical risks when quantifying losses of valuable assets stranded under ‘war risk’ insurance policies in conflict zones. 

• Quantifying loss can be a complex exercise. In this instance, the court identified March 10, 2022, as the point of “loss,” when Russian legislation prohibited aircraft exports thus triggering coverage under war risk policies. This ruling limited recoveries to policy caps that were often lower than those for all-risk claims, resulting in potential payouts being reduced by billions. Ultimately AerCap secured a little under a third of its $3.5 billion all-risk claim. 
• Valuation poses another challenge. There was uncertainty over the market values of aircraft stranded in Russia, notably due to questions around continuing airworthiness and re-registration by local authorities. In this case, the court relied on insured values at the loss date. However, fluctuating market conditions and operational status complicate such assessments. The question of whether valuations should reflect pre-conflict lease terms or post-sanction realities will likely be debated in future disputes. 
• Settlements further cloud the quantum. Prior agreements with Russian entities or insurers, involving significant financial settlements, required careful deduction to prevent double recovery. In this dispute, compensation focused on the market valuation of the stranded aircraft. In other cases, depending on the policy exclusions, business interruption type claims may also allow for the recovery of lost profits or broader financial impacts such as lost lease revenue. If so, this may necessitate greater consideration of mitigation or contingencies where an operator may, for example, be able to reduce operating losses by making more efficient use of its operational fleet. 

Rising Costs, Tightened Coverage, and Legal Turmoil are on the Horizon 

Ultimately this ruling is poised to fundamentally alter aviation insurance. With insurers likely to absorb the implications of heightened risk exposure, it would seem inevitable that fare prices will see further increase.   

At the same time, coverage terms may tighten significantly, with insurers restricting, or withdrawing, policies for airlines operating in, or near, conflict zones regardless of how minor or speculative the threat.   

Additionally, this decision is expected to trigger a wave of policy revisions, exclusions, and legal disputes as insurers reevaluate their exposure to geopolitical risks and seek to redefine the parameters of coverage.  

This case sets a powerful precedent. We anticipate further disputes arising concerning:  

• Sanctions-related losses
• Cyber warfare and hybrid threats
• Emerging conflict zones and grey areas in coverage

How HKA can help  

Our Aviation & Space team offers deep expertise in navigating complex insurance, leasing, and geopolitical risk disputes. We have supported clients across the entire aviation ecosystem, providing expert witness services, claims and quantum analysis, dispute resolution and litigation support, forensic accounting and investigations, valuations and economics, and strategic risk advisory. Whether you’re contemplating the immediate impact of this recent legal ruling or preparing for future industry challenges, our team is equipped to help you chart a clear and confident course forward.  

Simon Dean McCarroll, Partner, Forensic Technical Services 
Simon Dean McCarroll is an Aviation Expert and leader with over 25 years of worldwide aviation experience as both an airport client and a consultant, including in the Middle East, North America, and Antarctica. He serves as an Expert Witness and Expert Determiner for aviation cases, focusing on airport planning, design, operations, engineering, and dispute resolution. At HKA, Simon adds value by using his extensive experience and expertise to support and grow the aviation and space practice with a strong focus on collaboration across the firm. He contributes to the development of innovative solutions for complex aviation projects, ensuring that clients receive the highest level of service and expertise. He is recognised by Lexology as a Thought Leader in the transportation sector. 

Anthony Charlton, Partner, Forensic Accounting & Commercial Damages 
Anthony Charlton is a Chartered Accountant with over 30 years’ professional experience. He has been appointed as an expert in many matters involving forensic accounting and the assessment of economic loss and given oral evidence on around 40 occasions. His experience is global and covers a variety of industries including aviation, defence, technology media and telecoms, oil and gas, energy, resources, construction, real estate, mining, infrastructure, banking, and media. Anthony is a fellow of the Institute of Chartered Accountants in England and Wales and a member of its specialist valuation group. He is widely recognised by Lexology Index as a Global Elite Thought Leader and a thought leader in its quantum of damages, arbitration and investigations forensic experts’ research.