The volume of the domestic private market for military risk insurance is estimated at UAH 40-60 million, which does not correspond to the scale of the risks involved, according to a meeting of the League of Insurance Organizations of Ukraine (LIOU) on the creation of a military risk insurance system.
As noted on the LIOU website, unlike in 2022, insurance companies have now accumulated statistics on military risk insurance and have experience in concluding insurance contracts, settling claims, and making payments.
Insurers emphasized that even in a situation where a significant number of international reinsurers are refraining from active cooperation, awaiting market stabilization and security guarantees, some Ukrainian insurers have nevertheless gained access to international reinsurance, which has made it possible to increase insurance coverage limits, primarily for small and medium-sized businesses.
However, with the increasing frequency and intensity of shelling, insurers and reinsurers are forced to constantly revise their terms and conditions. For example, reinsurers’ quotes (net rates) increase from 4-5% to 8-10% during certain periods. This shows that insuring against military risks in a country that is already at war is an extremely difficult task. This is why the Ukrainian market is not attractive to international reinsurers, according to the press release.
Modeling various options for creating a military risk insurance system, insurers also noted the importance of public-private partnerships with the involvement of international institutions in this process.
At the same time, they noted that, in their opinion, the availability of state subsidies is not a guarantee of obtaining reinsurance and resolving the issue, and may even complicate it, since the state is highly likely to incur 100% losses, meaning that such insurance ceases to be insurance and becomes financing. Therefore, the main question remains who will pay the compensation and how, since neither the state nor Ukrainian insurers are able to assume the country’s military risks during the war, the LSU notes.
According to market experts, the risks, conditions, and definitions must be understandable and acceptable to foreign reinsurers, and the model must correspond to international analogues (insurance against terrorism (sabotage) risks). In addition, a working group should be set up with the participation of MPs, representatives of the Ministry of Economy, the NBU, international brokers, and insurers providing such insurance to study these issues and present the market’s position at a meeting with international reinsurers and other partners. These proposals will be forwarded to the parliamentary committee on finance, tax, and customs policy.
“International practice in insuring military risks does not have a ready-made solution for Ukraine, so developing one is primarily a task for specialists in the global insurance and reinsurance markets, and this is a real challenge,” emphasized Viktor Berlin, president of the LSU, whose words are quoted in the report.
