Adoption of the bill “On the system of insurance of military risks” No. 12372 in its current form will cause a number of negative consequences, believes Vyacheslav Chernyakhovsky, Director General of the Association “Insurance Business” (ASB). The head of the ASB raises the question of the expediency of creating a State Agency for Insurance of Military Risks, since a significant part of its functions has long been performed by insurance companies, which have successfully started to implement new programs of such insurance since mid-2022.
In particular, in his opinion, the bill does not allow all willing entrepreneurs and citizens to take advantage of such a state program, increases the costs of the deficit state budget for a contribution to the statutory fund of the State Agency for War Risks Insurance (from 8 billion UAH). It also implies high costs to support the Agency’s activities, as its work requires a large number of employees and structural subdivisions like a full-fledged insurance company. In addition, insurance or reinsurance contracts in the system of insurance of military risks may be concluded directly with the participation of insurance intermediaries (they may be insurance agents, in particular banks).
Also controversial provisions of the draft law, in his opinion, are the limited range of objects, namely, property pledged/mortgaged to banks during the entire term of the contract and housing construction objects during the entire period of new construction, reconstruction, major repairs. And limitation of territories where military risks can be insured. At the same time, the possibility of automatic termination of the current insurance contract is provided for objects, the location of which was located in the territory of high risk.
According to Vyacheslav Chernyakhovsky, some norms of the draft law do not comply with international practices in terms of insurance: “Firstly, the compulsory insurance of property without the consent of their owners is an atypical approach. Usually the owner independently disposes of it, including in matters of insurance coverage. Such insurance is applied only in some countries and only in the most dangerous regions (for example, earthquake insurance in Turkey). Secondly, the state usually provides assistance in insurance of catastrophic risks by means of special reinsurance on favorable conditions of insurance rates reduction. An example is the American flood insurance program,” he notes.
According to Chernyakhovsky, the ASB proposes other approaches to expanding the system of insurance of military risks, namely: the creation and implementation of a program of partial subsidizing by the state of voluntary insurance of military risks with the possibility of access of all enterprises and citizens to such a mechanism. Instead of creating a State Agency, the Export Credit Agency, which has such a right under its charter, could be obliged to reinsure military risks to be transferred to insurance companies under predetermined conditions and rules.
