Underwritten Weekly

Right now, as you read this, there are roughly 400 commercial aircraft flying passengers around Russia that, legally speaking, no longer exist.

They take off from Sheremetyevo. They land at Pulkovo. Families board them for holidays to Sochi. Business travellers sleep through the Novosibirsk redeye. The planes are real. The seats are real. The turbulence is extremely real. But according to the London Commercial Court, these aircraft suffered a total loss on 10 March 2022. They are, in insurance terms, gone.

The largest aviation insurance loss in history, and it turns on a question that sounds simple but absolutely isn’t: what does it mean to lose something that hasn’t been destroyed?

How Do You Lose 400 Planes?

You’d think it’d be difficult. It is not.

When Russia invaded Ukraine in February 2022, the Western sanctions response was fast and broad. EU and UK regulations prohibited leasing aircraft to Russian entities. The lessors, companies like AerCap, the world’s largest aircraft leasing firm, were legally required to terminate their leases and get their planes back.

They tried. They issued grounding notices. They sent termination letters. They did everything the contracts said they should do.

Russia’s response was blunt. On 10 March 2022, Government Resolution No. 311 banned the export of foreign-leased aircraft. A week later, new legislation let Russian airlines re-register these planes on the Russian civil aviation register, binning the certificates of airworthiness issued by Ireland and Bermuda where most had been registered.

Translation: we’re keeping them. Good luck.

The lessors couldn’t repossess. The airlines wouldn’t return. The Russian state had legislated to make sure of it. Around 500 aircraft, worth north of $10 billion, stuck behind a legal iron curtain.

Dead But Flying

Here’s the thing that makes this case genuinely weird. These planes aren’t sitting in hangars gathering dust. Russian airlines are operating them daily: domestic routes, international routes, carrying actual passengers and maintained, in a fashion, without Boeing or Airbus support, without legitimate spare parts, without the oversight frameworks that the rest of the world considers fairly important when it comes to keeping commercial aircraft in the air.

The planes are alive in every practical sense. They burn fuel. They accumulate flight hours. They wear out.

But the court says they’re dead.

What Does “Lost” Actually Mean?

This landed in the Commercial Court as a mega trial running from October 2024 to January 2025. Six lessors. 147 aircraft. 16 standalone engines. 18 Russian airlines including Aeroflot. Over $4.5 billion in insured value. About 70 barristers. The legal profession’s answer to a royal wedding, except everyone’s arguing about whether a plane you can see on FlightRadar24 counts as missing.

Mr Justice Butcher’s test: as of any given date, was the deprivation of possession, on the balance of probabilities, permanent?

Not “has the plane been destroyed” Not “is it damaged beyond repair” but: are you getting it back?

He concluded the answer became no on 10 March 2022, when GR 311 came into force. From that moment, Russia had legislated against return. The political situation offered no realistic prospect of reversal. The planes were permanently lost, not because they’d ceased to exist, but because the lessors had been permanently deprived of them.

Insurance is comfortable with destruction. A plane crashes, it burns, you count the wreckage and write a cheque. Deprivation without destruction is a different animal entirely. The insured asset is still out there, still functioning, still generating value: just not for you. Does that count as a total loss?

It does. Apparently.

Who Pays? (And Why AerCap Argued Against the Obvious)

Aircraft insurance splits into two buckets: All Risks (AR) cover for the everyday stuff: crashes, mechanical failure, ground damage and War Risks (WR) cover for the geopolitical stuff: confiscation, seizure, detention by government order.

Justice Butcher ruled this was a war risk loss. Russian government action. Restraint. Detention. Open and shut, you’d think.

Except AerCap, the biggest claimant, actually argued it was an all-risks loss. Why would you fight to get your claim categorised as something it plainly isn’t?

Money. AerCap’s war risk cover was capped at $1.2 billion against a total loss of about $2.1 billion. Their all-risks policy had no such cap. If you can squeeze a war into the “all risks” bucket, you get paid in full. If you can’t, you eat a billion-dollar shortfall.

They couldn’t. The court held it was war risks, end of. AerCap recovered just over $1 billion: ok, not nothing, but roughly half what they’d lost. The insurance architecture, designed when nobody thought a G20 nation would nationalise 500 planes overnight, left a gap you could fly a 737 through. Which, ironically, someone in Russia is probably doing right now.

The Grip of the Peril

I love this one. Partly because it sounds like a le Carré title, partly because it’s doing more heavy lifting than almost any other doctrine in insurance law right now.

Some war risk insurers had exercised review clauses to cancel their Russia cover before 10 March 2022. Their argument was clean: the loss happened after we’d cancelled. No policy, no claim. Sorry about your planes.

The lessors’ response: grip of the peril. If an insured peril takes hold during the policy period, if it closes around you, then it doesn’t matter that the final blow lands after the policy expires. The peril had you in its grip while the cover was live. What followed was inevitable.

Justice Butcher agreed. The Russian aviation authority had told airlines not to return aircraft as early as 5 March. GR 311 just formalised what was already happening. The peril had the lessors in its grip well before the insurers pulled the plug.

This doctrine was relatively obscure before COVID. Justice Butcher himself built it out in the Stonegate pub closure case. Now it’s load-bearing for billions in aviation claims. One of those quiet legal principles that nobody outside a courtroom cares about until suddenly it’s the only thing standing between you and an uninsured loss the size of a small country’s GDP.

What Happens Next

It’s not over. Not even close.

Chubb, Fidelis and Lloyd’s have permission to appeal. The Court of Appeal gets to decide whether Butcher was right on the war risk classification and the grip of the peril, and given there are billions riding on it, expect this to be fought hard.

There’s a second wave coming too. The Operator Policy claims: under the Russian airlines’ own insurance, which lessors can access through cut-through clauses, goes to trial in October 2026. Under Russian law. A different legal system applying different principles to the same facts. That should be fun.

And then the reinsurance cascade. Primary insurers pay out, claim from reinsurers, who claim from retrocessionaires, in the great chain of risk transfer that makes the whole market work. Every link is a potential fight.

The Bit That Keeps Me Up at Night

These aircraft are being flown without manufacturer support. No legitimate spare parts. No approved maintenance programmes. Russian airlines are cannibalising grounded planes for parts to keep the rest airborne. The airworthiness certificates that any Western regulator would want to see were suspended years ago.

At some point, one of these planes is going to have a maintenance-related incident. It’s not pessimism, it’s statistics. And when it happens, the liability question will be unlike anything the market has seen. Who’s responsible for the airworthiness of a plane that was taken by government order, maintained outside every international framework, and flown on a registration that the original certifying authority doesn’t recognise?

Nobody knows. But a lot of lawyers are going to find out.

The $10 Billion Question

Can insurance handle losses caused not by physical destruction but by geopolitical impossibility?

The answer, for now, is yes but painfully, slowly, and with spectacular argument about who absorbs the hit. And the permanence question the court resolved isn’t unique to planes in Russia. It applies to any asset, anywhere, that becomes unreachable because the political ground shifts under it.

Look at the world right now and tell me this is the last time it’ll happen.

The planes are still flying. The insurance says they’re gone. Somewhere in that gap is the future of geopolitical risk transfer, and if the insurance market can’t figure out how to price it properly, the next $10 billion surprise is just a government resolution away.

Until next week! Rob