Fidelis mulls appeal after High Court sides with lessors in Russian aviation case

Following a recent ruling by the English High Court in favour of aircraft lessors for the 2021 and 2022 underwriting years, a key development in the ongoing Russia-Ukraine aviation litigation, Fidelis Insurance Group has announced it is “reviewing all options”, including the possibility of an appeal.

Readers may recall that in July 2023, more than 40 aviation leasing firms, including AerCap, Aircastle, Avenue Capital, Carlyle Aviation Partners, FTAI Aviation, and Merx Aviation, petitioned the High Court to have the reinsurance dispute heard in London. Their goal was to avoid the risk of unfair hearings or inconsistent judgments in other jurisdictions. The court ultimately agreed, and since then, leasing companies have secured millions in settlements.

In a significant new development, the High Court has now ruled that claimants in the Russian aircraft lessor litigation can recover losses under war-risk insurance policies, rather than under broader all-risk policies.

In response, Fidelis has expressed disappointment with the decision, stating it “respectfully disagrees” with the court’s reasoning and is considering all options, including an appeal.

Fidelis continued, “Notwithstanding this outcome, Fidelis Insurance Group continues to maintain a strong balance sheet and remains well-positioned to advance strategic growth and capital management initiatives.

“In light of this decision, we have reached a resolution in respect of approximately 95% of the exposure related to lessor policy claims in litigation, effectively putting this event behind us.

“Looking ahead, we are excited about future opportunities as our underlying portfolio continues to perform well, and we remain focused on capitalising on attractive opportunities to drive growth and optimise margins.”

In May, Fidelis had previously noted that a favourable ruling would result in positive prior-year development, which would be reflected in its financial results once the legal process, including any appeals, was complete.

Conversely, in the event of an adverse ruling, as has now occurred, the firm had anticipated a potential negative prior-year development impact of up to $150 million, which it confirmed would be recognised immediately in its financial results.

In related news, aforementioned AerCap has also announced that in a judgment handed down today, the Commercial Court in London found that its subsidiary, AerCap Ireland Limited, is entitled to recover its claim for an indemnity of approximately $1 billion from the insurers under the “War and Allied Perils” Coverage section of its contingent and possessed insurance policy.

AerCap explained that this award is in respect of the aircraft and engines which it and its affiliates formerly leased to Russian airlines and were not recovered from Russia following its invasion of Ukraine in February 2022.

AerCap added, “In 2022, we recognised a pre-tax net charge of $2.7 billion to our earnings, which included a total loss write-off with respect to the assets which remained in Russia and Ukraine and impairment losses with respect to the assets which we had recovered from Russia and Ukraine at that time.

“Following recoveries of $1.3 billion in 2023 and $195 million in 2024, this indemnity award will bring AerCap’s total pre-tax recoveries relating to the Ukraine conflict to approximately $2.5 billion.

“The claims against insurers and reinsurers of the Russian airlines’ insurance policies in respect of a number of these assets remain ongoing in the Commercial Court in London, and we intend to continue to vigorously pursue those claims. However, the collection, timing and amount of any potential further recoveries in respect of those claims are uncertain.”

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