03 July 2025
Aircraft Non-Payment Insurance (ANPI) – SAAFI, a new product to support aircraft financing transactions
Gallagher Aerospace bring new Aircraft Non-Payment Insurance option SAAFI to airline client community.
The Gallagher Specialty Aerospace team are excited to announce our recent collaboration with Sompo and AXIS to bring to our client community their innovative product, Sompo AXIS Aviation Finance Insurance or ‘SAAFI’, a non-payment insurance product specifically tailored for airline clients.
In today's challenging market, characterised by geopolitical uncertainties and increased funding costs for new aircraft types, financing an aircraft has become more critical than ever for the world’s airlines.
Despite these challenges, the demand for air travel continues to grow, underscoring the necessity for new capacity in the aircraft financing market.
With the capacity of previously existing sources of aircraft finance becoming more restricted, the diversity of financing options has become crucial for airlines to navigate this complex landscape effectively.
Gallagher Specialty Aerospace as a leading airline insurance broker & consultant, working with SAAFI, aim to address these needs and provide solutions to support the evolving requirements of our airline clients and the broader aviation industry.
The Gallagher team sat down with SAAFI underwriters, Tim Gaul of Sompo and Richard Jelf of AXIS, after they spoke at Gallagher’s recent Aviation Insurance summit in London, to better outline this new product for our global airline clients.
Q) Can you please explain what SAAFI is?
Simply put, SAAFI stands for Sompo AXIS Aviation Finance Insurance. It's a new platform developed by Sompo and AXIS jointly providing non-payment insurance to airlines for the benefit of their lenders, usually commercial banks, when buying aircraft or engines.
Sompo and AXIS are two A+ rated insurers with extensive experience in the Aviation Non-Payment Insurance (‘ANPI’) market. ANPI gives lenders the benefit of 100% cover of principal and interest when financing aircraft and engines. Meaning that, in the event of non-payment, the insurers indemnify the insured lender for missed payments of principal and interest.
Q) Why was it Sompo and AXIS?
Sompo and AXIS have worked together for nearly 10 years in the ANPI market across a number of platforms and have developed excellent working practices, underwriting methodologies and risk appetite approaches in support of the aviation finance market. Together, we have worked through significant market stress, such as COVID, the Russian invasion of Ukraine and the Boeing Max grounding.
Collectively, we have financed well over 100 aircraft in the last few years and through that process have developed a strong appetite to grow in the sector. And we believe by working together, we can achieve this.
It is a case of pooling capabilities in order to provide airlines with the most compelling solution we can – be it access to insurance licenses, legal resources, technical expertise, but most importantly is our combined insurance capacity and our excellent reputation among lenders and airlines for execution in the ANPI market.
Under SAAFI, Sompo and AXIS can combine their material insurance capacity in order to support large transactions, such as multi-aircraft mandates, be it narrow-bodies or wide-bodies.
Q) Can you explain how ANPI benefits airlines?
ANPI can provide a number of benefits to airlines, both in terms of pricing and access to financing.
On the pricing aspect, a lender typically charges a margin based on the risk of a transaction. The risk of the transaction is largely determined by the borrower’s creditworthiness, with consideration given towards the strength of the collateral on offer, typically the aircraft or engine being financed. If a lender benefits from ANPI, the bank can enhance the credit quality of the airline or borrower with that of the insurance company, in the case of SAAFI, this is Sompo and AXIS. The improved risk of the transaction allows the lender to charge a lower risk margin on its financing.
We mustn't forget though that the insurance companies also charge an insurance premium that needs to be paid for, ultimately by the borrower, but in many circumstances the sum of the risk margin plus the insurance premium can in fact be less than what the risk margin would have been without the ANPI policy in place. So the ANPI can potentially reduce the all-in cost of financing for the airline.
If you think about capacity, some banks have a general interest in the aviation sector but, for one reason or another, are more cautious perhaps in lending in certain jurisdictions or to certain borrowers. In this case, the presence of the ANPI policy can help mitigate those concerns and therefore broaden the financing available to the airline. This has a number of other benefits, such as widening bank relationships and diversification of financing sources.
A useful comparison to ANPI is the Export Credit Agency (‘ECA’) guarantee. ANPI is in effect a private insurer alternative to the ECAs – and actually this is how ANPI was really first conceived – when the US Government ECA, USEXIM, had a partial shutdown between 2015 and 2019.
An important benefit to airlines, especially those with very large order books and financing requirements in the next few years, is that ANPI and SAAFI add diversity to their current sources of funding. This is going to help meet the volumes of financing required in the next few years, especially if other sources of finance have become harder to access. We were reminded of this during COVID, when ANPI remained an active market despite the extreme challenges for the sector.
'The improved risk of the transaction allows the lender to charge a lower risk margin on its financing.'
Q) And how about the benefits for lenders?
As we've discussed already, many capital providers, usually commercial banks, may have concerns or internal lending restrictions related to jurisdiction, borrower credit profile or other internal portfolio limit constraints. In this instance, the presence of ANPI can allow the bank to continue lending to the airline whilst preserving its available lending limits to that borrower.
Additionally, there are lenders who may find the presence of ANPI cover in fact allows them to be far more competitive on price, given the improved risk profile offered by the insurance companies.
Q) Who can use SAAFI?
We are keen to speak to any airlines, lessors or anyone looking to finance aircraft or engines. SAAFI is, however focusing on Airbus deliveries specifically since we support an alternative platform that supports Boeing deliveries.
While all airlines are, in theory, eligible to use SAAFI, the insurance companies have to apply their own underwriting criteria in order to determine their own appetite for providing the insurance cover.
Q) Can you describe SAAFI’s underwriting thought process?
Perhaps a good way of explaining it is to split this consideration into four parts:
Firstly, consideration of the credit profile of the airline. This will not just be a review of publicly available ratings reports and their financials, but also an internal assessment by the insurers’ own analysts to form an internal view of that credit.
Secondly, given that these transactions are fully collateralised, a review of the aircraft or engine being financed will also be performed to evaluate desirability and ease of remarking. This is critical as in the event the borrower defaults on its loan obligations, the insurance company pays the claim and seeks to recover its losses through recovering and selling the asset. An important metric to assess is the loan-to-value throughout the life of the loan.
Thirdly, an assessment of the jurisdiction needs to take place; consideration of Cape Town convention ratification, accessibility of Chapter 11 and prior experience of collateral recovery in that region are all important.
And finally, but by no means least, the insurer’s existing experience with the airline, as well as any existing exposure, also needs to be taken into account. We are always looking to work with repeat airline customers, especially where the experience has been positive. Developing new customer relationships is also very important; it adds diversity to our portfolio, and we believe this is something Gallagher can help us with.
These factors are all combined to form a view on the risk in the transaction. The result of which determines firstly whether we have an appetite for the transaction and secondly under what terms.
Both Sompo and AXIS have supported a wide range of airlines with varying financial profiles in the past and it is the adjustment of terms offered to the borrowers for instance a lower Loan to Value, a steeper repayment profile, a shorter tenor, that can all help get to a point where a SAAFI ANPI term sheet can be provided to the airline.
Q) Where is your appetite?
SAAFI does have a sweet spot in terms of appetite, and the best terms can be offered on new Airbus aircraft. Engines are a relatively new asset class for us but nonetheless, we have a strong interest in developing our business in this area.
Typically, the tenor would be 5 to 12 years to match the tenor of the loan. The loan amount would likely be somewhere between 60% and 85% of the asset’s appraised value. We have no particular preference whether we support a package of aircraft or a single aircraft.
Q) To support your underwriting assessment of a financing, what information do we need to prepare for SAAFI?
Often, the best place to start is a conversation with Gallagher and SAAFI – be it over the phone or in person. Both parties regularly attend industry conferences such as the recent Gallagher Insurance Summit but also events hosted by Airline Economics, ISHKA, ISTAT, etc.
When it comes to underwriting the risk, a number of different resources are used, be it financial information or aircraft valuation tools. A lot of this is 3rd party provided, but we also have our own models using data built up over the many years underwriting non-payment risk.
Other information we might request includes delivery schedules, preferred financing options, any particular bank relationships you would like to use, financials (if not publicly available), etc.
Gallagher is delighted to welcome the opportunity to engage with airlines in discussions regarding upcoming deliveries and the potential inclusion of SAAFI as one of your financing options.
Gallagher, in co-operation with SAAFI, will help guide you through the requirements and process to facilitate successfully accessing this new product to support your aircraft financing needs.
We are committed to supporting airlines, especially when facing challenges, and have proactively decided to step forward into this area.
Our mutual agreement with the SAAFI team to collaborate in the ANPI area underscores our dedication to identifying opportunities to enhance your operations wherever possible, such as through increased diversification of your financing channels.
We look forward to working closely with you to achieve your goals and support your continued success.
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