Carlyle calls for investigation into aviation insurers over Russia confiscation claims

Investment manager Carlyle Aviation Partners has escalated its concerns over aviation insurance industry practices by sending certified letters to key US Congressional committees.

The letters, addressed to the chairmen and ranking members of the US House Committee on Financial Services and the US Senate Committee on Banking, Housing, and Urban Affairs, call for an investigation into the reserve practices within the aviation insurance sector.

This action follows earlier communications by Carlyle with the Federal Insurance Office, where they expressed significant concerns about insurers who are reportedly holding inadequate reserves despite facing substantial losses, potentially amounting to “many billions of dollars.”

The catalyst for this dispute was Russia’s confiscation of more than 400 aircraft from international leasing companies, including 23 planes owned by Carlyle Aviation Partners, amid its invasion of Ukraine.

Carlyle alleges that despite having all-risk and war-risk insurance policies in place, their insurers have failed to honor claims for more than two years. The situation mirrors difficulties faced by other aircraft lessors dealing with aviation insurance syndicates.

Carlyle also argues that several insurers have publicly acknowledged their reserves, which they claim are insufficient to cover the billions of dollars in outstanding claims. They warn that this under-reservation poses “serious solvency and systemic concerns” not only for the aviation insurance sector but for the broader insurance industry.

Liabilities exceeding $3.2 billion due to bad faith

“We are leading litigation against aviation insurers for failing to pay their agreed-upon policies, and are calling on further investigations and regulation into the aviation insurance and reinsurance industry’s capital reserve practices,” Podhurst Orseck, Carlyle’s legal representation, said in the letter.

The letter also outlines the significant financial impact of the insurers’ failure to pay out claims, suggesting that the ongoing lawsuit could expose aviation insurers to liabilities exceeding $3.2 billion due to bad faith conduct under Florida law.

Carlyle’s correspondence seeks not just to address their individual claims but also to prompt broader regulatory scrutiny of reserve practices in the aviation insurance industry, potentially affecting numerous US-based companies and employers.

The letter concludes with an appeal for urgent regulatory action and offers to meet with the committees to discuss the matter further and provide additional insights.

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