Ukraine’s central bank, the National Bank of Ukraine, the Ministry of Economy and the Ministry of Finance presented the draft Law of Ukraine "On the System of Military Risk Insurance” to the business community. Ukraine plans to continue these consultations until December 2024 and then pass the bill to the parliament’s relevant committee.
Apart from generalizing rules on how the war insurance market will operate in Ukraine, the bill will also create the State Agency for War Risk Insurance, the Ministry of Economy reported on their website.
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This can enable the creation of a mass market war insurance product inside Ukraine that will help internal and foreign investors apply for compensation if Russian forces destroy their assets.
The war insurance will be financed both from Ukraine and donors. Ukraine is planning to create an accumulated mandatory insurance payments pool. Donors will also provide its financial assistance.
The state representatives held their first meetings with Ukraine’s National Association of Banks of Ukraine, the National Association of Insurers of Ukraine, European Business Association and American Chamber of Commerce in Ukraine. They are also planning to meet with Union of Ukrainian Entrepreneurs (SUP, Spilka Ukrajinskykh Pydpryjemtsiv) and The Federation of Employers of Ukraine, the National Bank of Ukraine Facebook post wrote.
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Why Ukraine needs its own war insurance agency
The State Agency for War Risk Insurance will create a common policy of risk assessment and unite existing projects in one system. Currently, investment projects in Ukraine can be insured from war risks by US agencies DFC and MIGA, as well as Ukraine’s Export Credit Agency. The ships that export goods and commodities can be insured through the Unity mechanism for ship insurance.
But insurance from the agencies mentioned is complicated and the agencies take a long time to study business models of the investment projects.
Ukraine needs its own product with simpler policies and a lot less time needed for due diligence. “A mass market war insurance product will also make companies feel more confident to sign deals,” Director of Capital Markets at CBRE Ukraine Yaroslav Horbushko told Kyiv Post in May 2024.
How The State Agency for War Risk Insurance will work
The state agency will determine, underwriting policy, a common policy of risk assessment and acceptance for insurers participating on the market already. According to the Ministry of Economy’s statement, it will also develop standardized insurance products, determine centralized approaches to pricing and maintain a single centralized database in the system of military risk insurance.
Ukraine’s war insurance services will cover the risks of physical damage caused by war. The bill will also impose a mandatory war insurance coverage for collateral and objects of residential construction. The list of objects that should be insured is not yet final, the Ministry reported.
Ukraine’s agency will first provide reinsurance for domestic agencies to protect them from excessive risks. After some time, foreign insurance can also join Ukraine’s state war insurance system set up in the bill, the first deputy head of the National Bank of Ukraine Kateryna Rozhkova said during the presentation.
“Our goal is to combine all existing programs into a single pool, create clear rules of the game and ultimately be able to attract international reinsurers to this market," the press release quoted Oleksiy Sobolev, First Deputy Minister of Economy of Ukraine.
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