Carlyle calls for investigations into aviation insurers over Russian confiscation claims

Investment manager Carlyle Aviation Partners has heightened concerns about aviation insurance industry practices by sending certified letters to key committees of the US Congress.

The letters, addressed to the chairs and ranking members of the U.S. House Financial Services Committee and the U.S. Senate Banking, Housing and Urban Affairs Committee, call for an investigation into reserve practices in the aviation insurance sector.

This action follows previous communications from Carlyle to the Federal Insurance Office raising significant concerns about insurers reportedly having inadequate reserves despite significant losses potentially amounting to “many billions of dollars.”

The trigger for this dispute was Russia’s seizure of more than 400 aircraft from international leasing companies, including 23 aircraft from Carlyle Aviation Partners, during the invasion of Ukraine.

Carlyle claims that its insurers have not paid its claims for more than two years, despite having all-risk and war risk insurance in place. The situation reflects the difficulties faced by other aircraft lessors working with aviation insurance syndicates.

Carlyle also argues that several insurers have publicly acknowledged their reserves, which they say are insufficient to cover billions of dollars in outstanding claims. They warn that this lack of reservations raises “serious solvency and systemic issues” not only for the aviation insurance sector, but for the insurance industry as a whole.

Bad faith liabilities exceeding $3.2 billion

“We are pursuing litigation against aviation insurers for non-payment of their agreed policies and are calling for further investigation and regulation of the capital reserve practices of the aviation insurance and reinsurance industry,” Carlyle legal representative Podhurst Orseck said in the letter.

The letter also outlines the significant financial impact resulting from the insurers’ failure to pay claims, suggesting that the ongoing litigation could leave the aviation insurers with liabilities of more than $3,000 due to bad faith conduct under Florida law. could cost $2 billion.

Carlyle’s correspondence is intended not only to resolve her individual claims, but also to prompt a broader regulatory review of deferral practices in the aviation insurance industry, potentially affecting numerous U.S.-based companies and employers.

The letter ends with a call for urgent regulatory action and offers to meet with the committees to discuss the matter further and gain additional insights.

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