War risk insurance in the construction industry is hampered by the lack of transparency of financial models, said Victoria Bereshchak, co-founder of the Partnership Mediation Institute, in a commentary to Interfax-Ukraine.
She noted that insuring war risks in the construction sector is much more difficult than in agribusiness, or large industry and energy. First of all, it is difficult to find financial institutions that are ready to provide guarantees and insure the property of developers.
“In residential real estate, this tool is hardly used, in particular, because of the difficult relationship between the market and potential insurers: they could not cooperate in peacetime due to legal issues and the lack of transparency of certain processes, in particular, the formation of financial capital of companies, and even more so in war,” Bereshchak emphasized.
At the same time, the expert noted that potentially, insurance of residential projects under construction will not greatly affect the cost.
“According to estimates, it is about 2-4% depending on the region (air defense protection of the city, density and number of attacks, potential and related risks with the war) and the size of the project,” Bereshchak explained.
For the commercial real estate segment, insurance is an important and necessary tool, especially for logistics centers.
The following military risks are most often considered in insurance:
explosion or direct hit of ammunition into an object containing explosives;
crash of military aircraft and/or remotely piloted objects or their parts onto the insured property;
military operations on the territory where the facility is located/construction is underway.
“Potentially (for commercial projects), we are talking primarily about cooperation with international financial organizations, the World Bank, and export credit agencies of other countries. I would also like to remind you that we have Law 3497-IX (draft law No. 9015), which significantly expanded the powers of the Expert Credit Agency to insure against military risks for investments of Ukrainian and foreign companies in Ukraine,” Bereshchak said.
