After The Seizures: What SMBC's Insurance Win Means For Aircraft Lessors Globally

In the wake of Russia’s 2022 invasion of Ukraine and the sweeping Western sanctions that followed, hundreds of foreign-owned commercial aircraft were effectively seized by Russian operators. Among the firms hit hardest was SMBC Aviation Capital, one of the world’s largest aircraft lessors, with billions of dollars' worth of jets stranded in the country.

Two years later, SMBC has confirmed it has recovered over $1.4 billion through insurance settlements — a landmark resolution that signals more than just financial relief. For the global aircraft leasing industry, this recovery sets a critical precedent: in a world where geopolitical risk is no longer a distant threat but a recurring reality, legal positioning, insurance structures, and policy clarity now matter more than ever.

Background: The Seizure of Foreign-Owned Jets in Russia

When Russia launched its full-scale invasion of Ukraine, the European Union and United States responded with a barrage of sanctions. These included a requirement for lessors to terminate aircraft leases with Russian airlines. In response, Moscow swiftly passed legislation to re-register the foreign-owned planes in Russia and effectively blocked their repossession.

Over 400 commercial aircraft, worth more than $10 billion, were trapped in Russian hands. SMBC alone had 34 jets stranded, with a pre-impairment book value exceeding $1.7 billion. Faced with the impossibility of physically recovering the assets, lessors turned to their insurance policies — a rarely tested but vitally important safety net in aviation finance.

Insurance as a Recovery Mechanism

Aircraft lessors typically carry multiple layers of insurance. For geopolitical or sovereign risks such as war, expropriation, or forced repossession failures, the key coverage is Aircraft Hull War Insurance. These policies are designed to cover total losses arising from confiscation, seizure, or unlawful interference by state actors.

In the case of Russia, SMBC and other lessors filed claims under these war-risk policies, arguing that the re-registration and refusal to return the aircraft constituted constructive loss. The scale of the claims — collectively estimated at over $10 billion — put pressure not only on insurers, but also on global reinsurers operating through the London market.

The Irish Legal Strategy and Settlements

Many of the world’s leading lessors, including SMBC, AerCap, and Avolon, are headquartered in Ireland, which has become a hub for aviation finance thanks to its favourable legal, regulatory, and tax environment. When insurers failed to pay out promptly, SMBC and five other lessors initiated a collective legal action in the Irish courts.

This legal pathway proved effective. The Irish courts offered jurisdictional clarity, judicial expertise in finance-related cases, and a neutral setting away from the politicisation of the claims. Over the past year, most cases were settled out of court, with SMBC’s latest disclosure confirming a total recovery of $1.41 billion, including $654 million over the past 12 months.

These settlements represent one of the most significant and complex insurance claim resolutions in commercial aviation history. While the details remain confidential, the scale of the payout suggests insurers ultimately accepted the legal and financial merit of the lessors’ claims.

Industry-Wide Implications for Aircraft Lessors

The SMBC settlement has immediately altered the risk calculus for aircraft leasing firms. For one, it reaffirms the value of comprehensive insurance structures and supports the idea that legal remedies remain viable even when physical asset recovery is impossible.

Going forward, leasing agreements are likely to be revised to include tighter language around sovereign interference, conflict escalation clauses, and lessor access rights. More attention will also be paid to the jurisdiction of lessees and the enforceability of cross-border contracts.

Perhaps most importantly, lessors will now view geopolitical risk not as theoretical, but as an active commercial variable — one that must be priced into lease terms, financing agreements, and insurance strategies.

Implications for Insurers and Underwriters

For the aviation insurance market, the settlements mark a watershed. The scale of payouts has triggered internal reviews across underwriters and reinsurers, many of whom are now reassessing both pricing and policy wording for aviation war risks.

There is likely to be a tightening of exclusions, more granular territory risk classifications, and enhanced due diligence before binding future coverage — especially in politically unstable regions. Some policies may introduce stricter thresholds for "constructive loss" definitions or limit payouts in cases involving state-backed impoundment.

In the long run, the outcome may be a bifurcated market where insurers offer tiered war-risk policies based on route exposure, lessee country, and the nature of the aircraft’s operations.

Market Sentiment and Leasing Sector Confidence

From a market confidence perspective, SMBC’s recovery is a notable success. Despite the initial hit to its balance sheet, the company has shown financial resilience and operational discipline, recovering over 80% of its stranded asset value through insurance alone.

This has not only reinforced investor confidence but also helped stabilise the firm’s credit profile and long-term fleet strategy. It also sends a reassuring signal to stakeholders across the leasing ecosystem — from banks to airlines — that the system can withstand shocks of even this magnitude when protections are properly structured.

Conclusion

SMBC’s $1.4 billion insurance recovery represents more than just a financial resolution. It is a clear statement about the importance of legal jurisdiction, structured risk mitigation, and disciplined contract design in an increasingly unstable world.

For the global leasing industry, this episode will shape how contracts are drafted, how insurance is purchased, and how risk is priced for years to come. And while few would welcome a repeat of such geopolitical turbulence, the SMBC case offers a blueprint for how to navigate and survive it.

Author: Ricardo Goulart