2025 was a turbulent year, including in June the much-anticipated judgment of Mr Justice Butcher to determine claims submitted by Aercap/various other lessors following the loss of 116 aircraft and 15 engines, with Aercap's claim alone standing at USD2.051 billion (reduced from USD3.5 billion following settlements ahead of trial).
The court held in particular that (i) the lessors had suffered physical loss/damage where, at any given date, deprivation of possession of the aircraft/parts was (on the balance of probabilities) permanent; and (ii) the sole proximate cause of the loss was Government Resolution 311, which prohibited the export/return of the aircraft. The court's view was that the “contingent” cover should respond, as opposed to the “possessed” (where the aircraft were not in the lessors' care, custody and control and the lessors had not been paid under the operator policies), and as the loss equated to ‘seizure/restraint’ with neither of the Political/Government Perils exclusions applying, War Risks insurers were left to pick up the bill up to their (lower) limit of USD1.2 billion.
Aviation
The reinsurance market is now seeing the presentation of aviation losses to outwards' policies across different wordings, with complexities around aggregation, given the size of the losses, and allocation, where although the judgment found that the date of loss was 10 March 2022 (when Government Resolution 311 was enacted) lessors whose policies were amended to exclude losses in Russia before this date were still covered on grounds the insured was in the “grip of the peril”. There is also an additional complication where the lessors are claiming (for the same losses) against the reinsurers (via cut through clauses) of local Russian operator policies. These claims will be determined by the Commercial Court – as a matter of Russian law – in October 2026.
Property damage
The market has also been busy evaluating the impact of the January 2025 wildfires in LA, with two fires in the Palisades and Eaton districts destroying more than 6,800 and 10,500 structures respectively, generating an estimated insured loss of USD25 billion - USD45 billion. The scope for disputes remains to be seen, with 19,854 of 33,717 claims partially paid (to the tune of USD6.9 billion) by 5 February, in line with insurers' modified obligations under the California Regulations following an emergency declaration. Nevertheless, questions remain around, for example, whether smoke damage is 'property damage', and as the long period of rebuild continues we can expect to see more activity in this area.
Challenges ahead
Although rumours of a softening market continue to persist, we expect 2026 to build on an eventful 2025 with growth in global unrest likely to bring hours clauses back into focus, the mainstream usage of weight loss drugs fuelling the appetite for class actions and severe connective storms on the rise, causing insured losses in the US of USD42 billion in the first nine months of 2025. Whether a growth in losses will result in – as was the case for COVID-19 and Russia – an increase in disputes remains to be seen, as well as whether the lessons learned in 2025 can be applied to the challenges ahead.
We also anticipate scope for disputes in the legacy space. Given the significant number of legacy transactions completed in the immediate aftermath of COVID-19, if longer tail losses worsen, we could expect some legacy carriers under increased stress, particularly in an environment where there may be fewer mid-size deals available.
