As Russia’s unprovoked invasion of Ukraine continues, hopes for a recovery in the global aviation insurance market have faded somewhat, with 2022 renewals set to feature “another complex commitment”, according to re/insurance broker Gallagher.
After two years of pandemic-related stress and multi-billion dollar industrial losses, the start of this year suggested a recovery in the global aviation market.
Gallagher notes that at the start of 2022, passenger levels were approaching, or in some cases exceeding, 2019 levels, which led to optimism across the industry as players considered a return to the profitability.
However, as the market rallied in the second quarter, Russian President Vladimir Putin’s decision to invade Ukraine and the resulting geopolitical uncertainty created a renewed sense of uncertainty, “casting a shadow over the optimism around of recovery”.
Western nations have imposed a series of sanctions on Russia aimed at crippling its economy, and Gallagher notes that these actions pose significant logistical and financial challenges for airlines, aerospace companies, lenders and financiers.
Reports suggest some 400 Western planes are still in Russia, with some commentators suggesting a possible loss of $10 billion if they cannot be recaptured.
The Kremlin has said that any Western planes still in Russia after leases were terminated in March will remain in the country indefinitely, while the country plans to nationalize Western-made planes grounded within its borders. If this move materializes, analysts believe it could be a historic loss for the re/insurance industry.
Commenting on the implications for the insurance industry, Gallagher says that in such a rapidly changing situation, it is not possible to predict how things will play out.
“Either way, the 2022 renewals are expected to present another complex commitment,” the broker says.
Looking ahead, Gallagher expects to see a continuation of the current trend in the aviation insurance market, albeit with some upward pressure on pricing, particularly related to War and Excess War activity. PT.