Two decades ago, as a resurgent Russia sought to reclaim its place on the global stage, flagship airline Aeroflot and various start-up carriers accelerated their shift from Soviet-era Ilyushins and Tupolevs to modern jetliners.

That proved a bounty for Airbus and Boeing, of course, but it also enriched a less exalted corner of the aviation business: aircraft leasing firms. Dozens of lessors jumped in, and today about half of the 1,000 planes in the Russian fleet are owned by companies outside the country.

Vladimir Putin’s war in Ukraine has thrown that market into turmoil, setting up a high-stakes tussle between leasing companies and their insurers, who say they’re not obligated to pay many claims because sanctions required them to drop coverage in Russia.

Days after the invasion, the European Union, seeking to pressure Moscow to withdraw its troops, ordered lessors to take back their planes. About 30 jets were seized in places such as Hong Kong, Istanbul and Mexico City. But the Kremlin quickly imposed its own ban on most international flights for Russian airlines, leaving almost 400 foreign-owned aircraft stranded.

When the places where the planes were registered – mostly Ireland and Bermuda – withdrew their safety certifications, Russia encouraged its carriers to also register them at home, a move that’s banned by international aviation treaties.

“I don’t think anyone in the insurance market contemplated Russia re-registering Western aircraft,” says Garrett Hanrahan, global head of aviation at insurance broker Marsh. “The equipment, the hulls, and the engines in Russia are likely to stay there.”

The leasing companies soon called their insurers and demanded payments on policies valuing planes at anywhere from $15m to $150m – for total claims that could top $10bn (€9.5bn), according to Fitch Ratings.

The EU’s sanctions forbid sales of original parts and services to airlines in Russia, which will make normal upkeep impossible. And the situation risks rendering the planes unmarketable when they come off lease because maintenance won’t be verified.

“Aircraft with no reliable maintenance records or uncertain provenance would be worthless to major lessors working in mainstream markets with reputable customers,” says John Strickland, head of JLS Consulting in London.

As the two sides argue over who picks up the tab, insurers will insist the triggering event for lessors’ losses came on March 14, when Russia began allowing re-registration, brokerage Jefferies predicts. And that date, the insurers will say, is – conveniently – after they cancelled most policies because of sanctions imposed in late February.

The lessors counter that insurance can’t be stripped away after a risk materialises.

“Our members have paid for robust insurance policies for decades, which are held precisely for such situations,” says Declan Kelly, chairman of Aircraft Leasing Ireland, an industry group representing 33 lessors in the country. “We expect these claims to be paid out in full.”

Since February, the cost of insurance for aircraft seizure and other war-related risks has tripled, according to Marsh. Dublin-based AerCap, the largest jet leasing firm, says it has filed a claim for about $3.5bn to cover losses on 113 planes stuck in Russia. Air Lease Corp, which plans to write down more than $800m for its 27 jets there, and BOC Aviation Capital, with 17 planes in the country that it values at almost $600m, say they’re pursuing insurers on the losses.

Some in the insurance industry say the loss estimates are vastly overblown. While the ratings firms added up the entire value of planes stuck in Russia, the real liability faced by the insurers will end up being just about 10pc to 15pc of the planes’ value, according to Lloyd’s of London, which runs a marketplace connecting aircraft owners with underwriters.

“It’s much smaller than many people would think,” Lloyd’s CEO John Neal said. “It’s a major event loss, but it’s a loss that I think is manageable.”

Insurers typically must cover the cost of individual incidents –an equipment failure, damage to aircraft, or even a crash resulting in the loss of a plane and millions of dollars in payouts to families of passengers who perish. As flying has become safer over the decades, those premiums have come down, leaving the industry unprepared for events such as the loss of hundreds of planes to Russia.

Marsh says Russia’s seizure could surpass the September 11, 2001 attacks to become the biggest coverage loss in aviation history. Days after New York’s Twin Towers fell, insurance companies cancelled airlines’ war and terrorism policies on short notice, forcing governments to step in and offer coverage.

Before September 11, “no one expected four planes to go down at once,” says James Healy-Pratt, a partner with Keystone Law in London. “Similarly, the risk of a mass seizure like what we’ve seen in Russia wasn’t properly contemplated. This will result in a price shock” – and perhaps spur carriers to bypass underwriters by setting up their own coverage pools.

Lessors argue that they, and ultimately airlines and their passengers, will end up footing the bill. Insurers will “make it back from charging all of us all over again the following year and for many years to come”, said Robert Martin, CEO of BOC Aviation. “It may force us all to do a complete rethinking about how the aviation industry does insurance.”