Success may drive expansion of AFIC consortium
The success of the Marsh/Boeing sponsored Aircraft Finance Insurance Consortium may well lead to its expansion beyond the existing panel of four insurance companies, according to Victoria Hartley, Boeing Capital Corporation's Senior Director of Customer Finance for Europe, who was speaking in the Aviation Finance stream at The Financial Centres Summit held earlier this week in Dublin, Ireland.

AFIC's innovative product provides non-payment insurance to banks and capital market investors involved in the financing of new aircraft from the US aircraft maker. To date the consortium has provided cover on 12 aircraft, including one 747-8 and two 787-9s for Korean Air Lines, six aircraft for Norwegian Air, two for aircraft leasing company Intrepid and most recently one aircraft for flydubai. Industry sources have identified flydubai and Turkish Airlines as likely candidates for deliveries in the near future.
[L-R] Victoria Hartley, Boeing Capital Corporation; Leslie Kurshan, Marsh and Joe Gill, Aviation Finance during the 'Innovation in Financing' panel in the Aviation Finance stream at the Financial Centres Summit held in Dublin on October 17th.

Leslie Kurshan, Leader of Innovative Client Solutions 
at Marsh, told the Summit: 'What we have done so far has surpassed our expectations.' AFIC had been mandated to do four more aircraft deliveries in the current year and was hoping to do many more in 2018, she added.

Hartley said the four insurance companies in the initial underwriting panel (Allianz, AXIS Capital, Sompo International and Fidelis) had budgets which they would reach sooner or later. 'Then the question will be whether they will choose to double it and carry on for another two years or will they bring in other insurers? It's really up in the air at the moment.'

But, she added, the four insurers currently on the panel were not the only ones that Marsh has spoken to when it was working with Boeing to develop the panel. 'There's plenty more interest in joining this group, especially with the level of transactions now being closed,' she said.

Kurshan said the level of participation by the underwriters in creating the financial package being underwritten was a crucial differentiator for AFIC. 'What's really different about this from an insurance perspective is that the insurers have become the primary risk takers in the aircraft purchasing transaction,' she said.

In the past, she explained, even where insurers had participated in a transaction to facilitate asset finance, they had done so in conjunction with a bank that had already structured and negotiated the deal and prepared all the related documentation. Only then would a lender come to the insurance market seeking partners to share the risk. But in the AFIC product the insurers were now taking the primary role in terms of structuring the transaction, with the insurers attorneys driving the terms of the financing.

The Aircraft Finance Insurance Consortium Aircraft Non-Payment Insurance (ANPI) product was developed by Marsh in response to a request by Boeing Capital Corporation to Wall Street institutions in 2016 to create an alternative structure to the US export credit guarantees provided by the US state-backed Ex-Im Bank. These guarantees apply to credits of less than investment-grade which had been provided by the Ex-Im Bank until it ran into a political impasse which has subsequently prevented it approving individual transactions of more than $10 million.

Kurshan and Hartley have both been at the heart of the development and launch of the AFIC policy and product. Kurshan is the Marsh attorney who managed the entire evolution of the product while Hartley is the Senior Finance Director at Boeing directly involved in managing the project.