The European Bank for Reconstruction and Development (EBRD) and leading professional services firm Aon are launching a tailor-made, highly innovative facility to help revitalise the war risk insurance market in Ukraine. A new Bank guarantee, designed to boost the provision of reinsurance capacity to private-sector insurers, will help to address the ongoing challenges posed by the war.
Under the new €110 million Ukraine Recovery and Reconstruction Guarantee Facility, the EBRD will support global reinsurance companies with a guarantee covering losses on certain war-related risks underwritten by local Ukrainian insurers. It aims to leverage existing market infrastructure, as well as tried and tested risk transfer mechanisms from the insurance industry, to provide the protection that private-sector investors require.
Russia’s full-scale invasion of Ukraine in February 2022 has led to a significant reduction in reinsurance capacity, as international reinsurers have largely withdrawn from the market. This has left local insurers considerably limited in their ability to offer commercial war risk insurance products. By making such insurance more accessible, the facility will stimulate business activity and economic growth, paving the way for Ukraine’s recovery and reconstruction.
The first of its kind, the new scheme is designed as an open platform that can transact with different insurance market participants seeking to benefit from the guarantee. Global speciality reinsurer MS Amlin is the first international reinsurance partner to join the Bank’s facility. By allowing the UK-based reinsurer to transfer reinsurance exposure off its balance sheet, the scheme will enable MS Amlin to re-engage with Ukrainian insurers and provide much-needed war risk cover.
Ukrainian insurance companies INGO, Colonnade and UNIQA will be among the first local market participants to actively drive the expansion of war risk insurance in the Ukrainian market. Thanks to their wide distribution networks, the facility is expected to foster the provision of war risk coverage to businesses and small and medium-sized enterprises (SMEs) at scale.
Initially, the scheme will cover inland cargo, motor vehicle damage and railway rolling stock. It has the flexibility to expand to a broader range of assets as market demand evolves. As such insurance policies are generally short term, the facility will be able to recycle capital and provide coverage for a multiple of the guarantee amount, depending on the number of policies sold and the frequency of claims. Based on this approach, it is estimated that the Bank’s guarantee could facilitate insurance cover for up to €1 billion worth of goods and vehicles in transit each year, with a significant economic impact.
The facility is initially backed by France, the United Kingdom, Norway and the TaiwanBusiness-EBRD Technical Cooperation Fund. Additional donor support has been pledged by the European Union and Switzerland. Further donor contributions will enable the growth of the EBRD guarantee over time.
The EBRD and Aon have also coordinated closely with the Ukrainian Ministry of the Economy and the National Bank of Ukraine to ensure the provision of war risk insurance policies to Ukrainian companies and help strengthen the Ukrainian economy. The facility is designed to complement facilities offered by other international organisations and the Ukrainian government.
EBRD President Odile Renaud-Basso said: “This is a significant milestone for Ukraine and a testament to the EBRD’s unwavering commitment to supporting the country’s real economy. The EBRD’s guarantee will enable private-sector reinsurers to re-engage on Ukrainian war risk and build a resilient insurance market in Ukraine. This is crucial to giving businesses confidence that their assets are protected, which, in turn, will unlock and accelerate investment in Ukraine.”
Aon Chief Executive Officer Greg Case said: "Aon’s steadfast commitment to Ukraine compels our firm to continue to identify new opportunities for businesses to invest in the country during the ongoing war. This innovative new facility in collaboration with the EBRD further enhances the stability of the insurance market in Ukraine and strengthens the foundation for economic resilience and growth."
Martin Burke, Chief Underwriting Officer at MS Amlin, said: “We are proud to support this innovative solution, providing much needed reinsurance capacity to help the domestic Ukrainian insurance market rebuild itself and support local businesses and clients. One could not find a better expression of our company’s purpose, providing continuity in uncertain times, than through our commitment to this scheme.”
Yuliia Svyrydenko, first Deputy Prime Minister and Minister of Economy of Ukraine, said: “We are sincerely grateful to the EBRD and all parties involved in launching this insurance mechanism. The market has been eagerly anticipating it. I am confident that this mechanism will provide much-needed support for small and medium-sized businesses, which have been severely affected by the war. It will help attract investment to the Ukrainian economy and serve as a signal to other market players that new insurance mechanisms can and should be implemented, as there is clear demand from the private sector.”
Since February 2022, the EBRD has deployed more than €5.4 billion in Ukraine, focusing on supporting energy security, vital infrastructure, food security, trade and the private sector, in addition to key policy reforms. In 2023, the EBRD Board of Governors approved a capital increase of €4 billion to support investment in Ukraine both in wartime and during the subsequent reconstruction phase.
