The Ukrainian government plans to create a special fund to cover the “first layer of losses” incurred by businesses due to war risks. The program would provide compensation for damage to fixed assets of up to $10 million per legal entity, while the total size of the fund could reach $3–4 billion. The mechanism is expected to be launched in January 2027.
The concept was developed by the Ministry of Economy. According to the document, the Export Credit Agency (ECA) is expected to administer the program. Under the first-loss mechanism, the fund would cover the initial portion of losses, while losses above the established threshold could be insured by private insurers and international reinsurers.
The program will apply to fixed assets considered critical to maintaining companies’ production capacity. Large, medium-sized and small businesses operating in selected sectors will be eligible for compensation. These sectors include manufacturing and extractive industries, agriculture, transport, water supply, energy, healthcare, education and trade.
The government is expected to contribute $1 billion to the fund, while another $2–3 billion is planned to be raised from international donors. Business contributions equal to 2% of the insured amount will provide an additional source of funding. Accordingly, a company seeking the maximum coverage of $10 million would be required to contribute $200,000.
The fund will not include a deductible. At the initial stage, participants are expected to face only minimum eligibility requirements, limited to basic risk-mitigation criteria. Compensation will be paid for both direct and indirect damage caused by military hostilities.
Once a complete set of documents has been submitted, payments are expected to be made within 30 calendar days. If necessary, the payment period may be extended to 60 days.
The number of fund participants will continue to increase until the calculated capital requirement reaches the established limit. Once that threshold is reached, acceptance of new applications will be suspended until the fund is replenished. The limit itself is expected to be revised depending on changes in the level of war risk and the frequency of strikes.
According to estimates by the Ministry of Economy, annual war-related losses to the fixed assets of Ukrainian businesses amount to $4–10 billion. At the same time, the maximum capacity of Ukraine’s insurance and reinsurance market for all assets is currently estimated at no more than $1 billion. This leaves an annual insurance coverage gap of around $3–9 billion.
The ministry expects the first-loss mechanism to partially reduce this gap while also expanding the capacity of the private insurance market. Losses above the level covered by the state-and-donor-backed fund could be assumed by private insurers and international reinsurers. Preliminary estimates suggest that state compensation could quickly cover around 50% of businesses’ demand for war-risk insurance.
To oversee the fund’s operations, the Ministry of Economy plans to strengthen the ECA Supervisory Board, create a public dashboard containing information on fund inflows, use of funds and payments made, and conduct independent audits of operations and financial statements. A Public Council under the ministry is also expected to be established.
Economy Minister Oleksandr Kravchenko announced the launch of new business support instruments on September 11 during the meeting “From Relocation to Development: How to Strengthen Support for Relocated Businesses.” In addition to the first-loss fund, the government is considering concessional financing for retail, adding Kyiv and Kyiv Region to the list of higher-risk territories to provide businesses with access to expanded war-risk insurance, as well as extending the 5-7-9 lending program. According to the minister, these programs are planned to remain in effect through the first quarter of 2027.
The total financing requirement for the planned measures is estimated at UAH 6 billion. Funding sources have not yet been determined, and the government continues to search for them, according to the minister.
At the same time, the Ministry of Economy has been discussing a possible increase in VAT for several weeks. The standard tax rate is currently 20%, while reduced rates apply to certain categories of goods, including a 7% rate for medicines. The possibility of increasing the tax burden is being considered amid the need to finance business support programs and other government expenditures.
