Ukraine War Risk Facility: Relaunching War Risk Insurance in Ukraine
The European Bank for Reconstruction and Development and international insurance broker Aon are launching a dedicated, highly innovative program aimed at reviving the war risk insurance market in Ukraine.
The new EBRD guarantee will improve private sector insurers’ access to reinsurance, helping to overcome the ongoing challenges caused by the war.
Under the new €110 million Ukraine Recovery and Reconstruction Guarantee Facility, the EBRD will provide international reinsurers with a guarantee to cover certain war-related risks insured by Ukrainian insurers.
The Ukraine War Risk Facility leverages existing market infrastructure and proven insurance industry mechanisms to provide the protection that private sector investors need.
The Russian full-scale invasion of Ukraine in February 2022 has significantly restricted access to reinsurance services, as international companies have largely ceased operating in the Ukrainian market. This, in turn, has significantly limited the ability of Ukrainian insurers to offer commercial war risk insurance products.
Expanding access to such insurance through the new program will contribute to the revival of economic activity and growth, creating a basis for the recovery and reconstruction of Ukraine.
The new program is the first of its kind and will operate as an open platform through which different insurance market participants will be able to access the guarantee. Global reinsurance syndicate MS Amlin is the first international partner in this market to join the Bank’s program.
The program will enable the UK company to reduce the amount of relevant liabilities on its balance sheet, which will allow it to resume active cooperation with Ukrainian insurers to provide much-needed war risk insurance.
Ukrainian insurance companies INGO, Colonnade and UNIQA will be among the first participants of the program in the local market and will actively work to expand access to war risk insurance. The presence of these companies’ extensive partner networks will ensure large-scale access to war risk insurance for businesses, including small and medium-sized enterprises (SMEs).
Initially, the program will cover land freight, damage to vehicles and railway rolling stock. It may be expanded to other types of property in the future, taking into account market needs.
Given that such policies are typically short-term, the program is designed to reuse capital with the achievement of aggregate coverage that will exceed the guarantee amount many times over, depending on the actual number of policies sold and the frequency of insurance claims.
According to preliminary estimates, based on this approach, the Bank’s guarantee could provide insurance coverage for a total of up to €1 billion in goods and vehicles per year, which will have a significant economic impact.
The programme is initially supported by France, the United Kingdom and the TaiwanBusiness-EBRD Technical Cooperation Fund. Additional donor support has been pledged by the European Union and Switzerland. Further donor contributions will help expand the EBRD guarantee.
The EBRD and Aon have worked on the preparation of the programme in close coordination with the Ministry of Economy and the National Bank of Ukraine, in particular to ensure complementarity between the new initiative and other programmes offered by other international organisations and the Government of Ukraine to expand war risk insurance for Ukrainian companies and strengthen the Ukrainian economy.
EBRD President Odile Renaud-Bassaud said: “This is an important milestone for Ukraine and demonstrates the EBRD’s unwavering commitment to supporting the real sector of the Ukrainian economy. The EBRD guarantee will allow private sector reinsurance companies to work on Ukrainian war risks again and will contribute to building a sustainable insurance market in Ukraine. This is crucial for businesses to feel confident that their assets are protected, which in turn will help accelerate and grow investment in Ukraine.”
MS Amlin Chief Underwriting Officer Martin Burke said: “We are proud to support this innovative solution, which will provide access to much-needed reinsurance services, which in turn will help rebuild the Ukrainian insurance market and support Ukrainian businesses.”
We are grateful to the EBRD and all parties involved in launching this insurance mechanism. The market has been waiting for it for a long time. I am confident that this mechanism will provide much-needed support for small and medium-sized businesses that have been severely affected by the war. It will also help attract investment into the Ukrainian economy and send a signal to other market participants that new insurance mechanisms can and should be implemented, as there is a clear demand for them from the private sector.sector
Yulia Svyrydenko, First Deputy Prime Minister – Minister of Economy of Ukraine
Since the beginning of the Russian invasion in 2022, the EBRD has already allocated more than €5.4 billion to Ukraine, focusing on supporting energy security, critical infrastructure, food security, trade, the private sector and key reforms. In 2023, the EBRD Board of Governors approved a capital increase of €4 billion to support investments in Ukraine during the war and the subsequent recovery phase.