The European Bank for Reconstruction and Development (EBRD) and global insurance and reinsurance broker Aon have announced the launch of a specialized program aimed at restoring the activity of the military risk insurance market in Ukraine, under which the EBRD provides guarantees of EUR 110 million.
“The Bank’s partnership with Aon will help to restore the activity of international reinsurance companies in the Ukrainian military insurance market. The Bank’s new guarantee will improve the access of private sector insurance companies to reinsurance, which will lead to overcoming the current challenges caused by the war,” the EBRD said in a press release on Thursday.
According to it, the program will involve the international reinsurance company MS Amlin and Ukrainian insurance companies INGO, Colonnade and UNIQA. It is specified that the initiative is supported by donors, including France, the United Kingdom, Norway and the Taiwan-Business-EBRD Technical Cooperation Fund.
Under a new EUR110 million guarantee program for Ukraine’s recovery, the EBRD will provide international reinsurance companies with a guarantee to cover certain war-related risks insured by Ukrainian insurance companies. The program will utilize existing market infrastructure and proven insurance industry mechanisms to provide the protection required by private sector investors, the release said.
It is stated that Russia’s full-scale invasion of Ukraine in February 2022 led to a significant restriction of access to reinsurance services, as international companies have largely ceased to operate in the Ukrainian market. This, in turn, has significantly limited the ability of Ukrainian insurance companies to offer commercial insurance products against military risks.
It is emphasized that the new program is the first program of its kind and will operate as an open platform through which various insurance market participants will be able to access the guarantee. Global specialized reinsurance company MS Amlin is the first international partner in this market to join the bank’s program. Thanks to this program, this British company will be able to reduce the amount of relevant liabilities on its balance sheet, which will allow it to resume active cooperation with Ukrainian insurance companies to provide much-needed insurance for military risks.
It is specified that at the initial stage, the program will cover insurance of land freight transportation, damage to vehicles and railway rolling stock. In the future, it may be expanded to cover other types of property, taking into account market needs.
Given that such policies are typically short-term, the program is designed to reuse capital to achieve aggregate coverage that will exceed the guarantee amount many times over, depending on the actual number of policies sold and the frequency of claims, the EBRD said.
“According to preliminary estimates, based on this approach, the bank’s guarantee can provide insurance coverage totaling up to EUR1 billion of goods and vehicles per year, which will have a significant economic impact,” the EBRD predicts.
It is also noted that the European Union and Switzerland have promised additional donor support. According to the release, the EBRD and Aon worked in close coordination with the Ministry of Economy and the National Bank of Ukraine to prepare the program, in particular to ensure complementarity between the new initiative and other programs offered by other international organizations and the Ukrainian government, with the aim of expanding war risk insurance for Ukrainian companies and strengthening the Ukrainian economy.
