Marsh launches aircraft finance consortium in Japan

First to access the consortium revealed

Marsh launches aircraft finance consortium in Japan

Insurance News

By Duffie Osental

Insurance broker and risk adviser Marsh has announced the launch of a Japanese Aircraft Finance Insurance Consortium (Japanese AFIC) in collaboration with Sompo Japan Nipponkoa.

The AFIC was formally launched globally by Marsh in June 2017 to provide an alternative aircraft finance insurance product for banks and capital market investors that are funding Boeing aircraft. Marsh and Sompo developed the Japanese AFIC to provide insurance locally, offering the same terms as the global programme to Japanese financial institutions through a Japanese insurer.

Marsh also revealed that EL AL Israel Airlines Limited (EL AL) is the first airline to access the Japanese AFIC to support the purchase of Boeing aircraft. In what is the first AFIC-supported financing arrangement for EL AL – and the first to be solely funded by the Development Bank of Japan (DBJ) – the DBJ has provided loans for the airline to purchase a new Boeing 787-9 aircraft, which was delivered earlier this month. Using Japanese AFIC’s non-payment insurance product, DBJ is protected against credit default risk by EL AL for the duration of the loan.

The EL AL arrangement also marks the first AFIC-supported Japanese operating lease with call option (JOLCO), a cost-efficient financing structure for airlines and aircraft leasing companies. The JOLCO was arranged by SBI Leasing Service and ABL Aviation.

“Since its launch, AFIC has made a significant contribution to the diversification and further development of the aircraft finance market,” said Robert Morin, AFIC transaction and business development leader at Marsh. “The work of Marsh, DBJ, Sompo Japan Nipponkoa and Sompo International, SBI Leasing Service, and ABL Aviation with EL AL to finance the new Boeing 787-9 aircraft marks a significant milestone in AFIC’s global development.

“Through the creation of Japanese AFIC, many Japanese financial institutions, especially regional banks, can reduce the lending risks associated with aircraft finance and get involved in this dynamic industry, and offer airline financing solutions with greater confidence.”

Dganit Palti, chief financial officer of EL AL, said that the transaction strengthens the links between Israel and Japan.

“EL AL Israel Airlines is happy to finance an aircraft, for the first time by a Japanese bank. Such financing emphasises the strengthening of the connection between the two countries,” said Palti. “We believe that those connections will be further strengthened by opening the direct route between Tel Aviv and Tokyo by EL AL in March 2020.”

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