Russian plane case forces Fidelis to add $287m to loss reserves
Fidelis Insurance Holdings has added $287.2 million to its loss reserves related to the stranding of leased commercial aircraft at the outset of Russia’s invasion of Ukraine.
Dual “super trials” are underway in London and Dublin related to 400 planes owned by western aircraft lessors which were trapped in Russia when it invaded Ukraine. The dispute centres around whether the lessors should take up to an estimated $10 billion in losses or if their insurers should cover them.
The planes were leased to Russian airlines but when the war broke out and sanctions were imposed on Russia, the aircraft were re-registered in Russia and ownership was transferred to the airlines. Many of the aircraft were previously registered in Bermuda.
Bermuda-based Fidelis said it had been “judiciously” settling claims and around two third of its potential exposure were in various states of settlement but the remainder were subject to a judgment in the London case, where hearings ended on Friday.
It said the claims related to business underwritten in the 2021 and 2022 underwriting years and impacted by the ongoing Russia-Ukraine aviation litigation.
The London case pits aircraft lessor AerCap against its insurers, which include AIG and Lloyd’s of London. The value of the aircraft in this case is said to be $3.5 billion.
High Court Judge Christopher Butcher is set to determine whether the aircraft held in Russia when the country was hit with sanctions after the invasion of Ukraine in February 2022 can be declared "lost" or if at some stage they could, in theory, be returned.
Fidelis was expected to argue in the London case that the lessor could have sought an export permit from Russia — even after the planes had been re-registered. This would have allowed them to be flown out of Russia.
“In respect of the aviation litigation, the company has been judiciously settling claims to derisk its overall exposure,” Fidelis said in today’s statement. “In addition, the company has strengthened reserves, in large part to make allowance for ongoing settlement discussions and also to reflect recent developments and new information received.
“To date, the company has successfully settled or is in various stages of settlement discussions in respect of approximately two-thirds of the total exposure related to lessor policy claims currently in litigation.
“Of the remaining lessor policy claims in litigation, a significant portion of these claims relate to the English trial that commenced in October 2024, in respect of which the Company continues to hold reserves based on a probabilistic model of potential court outcomes, incorporating recent developments and updated information received.
“The English trial concluded February 14, 2025, and a court judgment will be rendered in the coming months.”
Fidelis said the reserve addition would reduce its net income for 2024 to between $100 million and $120 million and net operating income of $120 million to $140 million. Through the first nine months of the year, Fidelis had net income of $235 million. Fidelis is due to release its fourth quarter and full year results next Tuesday.
Dan Burrows (pictured), group chief executive officer, said: "We have meaningfully reduced our overall exposure to the complex and evolving Russia-Ukraine aviation litigation, lowered the potential downside risk associated with this event and provided increased certainty to our shareholders.
“Excluding the impact of the prior year development attributable to our aviation and aerospace line of business, our full-year results would have exceeded our long-term operating ROAE target. Our balance sheet remains strong, and our business is well-positioned to support future growth and deliver long-term value for shareholders.”
Fidelis Insurance Group also said it expects it net loss from the January California wildfires to be between $160 million and $190 million based on an insured industry loss estimate of $40 billion to $50 billion.
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