The European Bank for Reconstruction and Development (EBRD) and the global insurance and reinsurance broker Aon announced the launch of a specialized program aimed at revitalizing the military risk insurance market in Ukraine, under which the EBRD is providing guarantees amounting to EUR 110 million.
"The partnership between the bank and Aon will facilitate the renewed activity of international reinsurance companies in the Ukrainian military insurance market. The new guarantee from the Bank will enhance the access of private sector insurance companies to reinsurance, helping to overcome the current challenges posed by the war," the EBRD stated in its press release on Thursday.
According to the release, the program will involve the international reinsurance company MS Amlin and Ukrainian insurance companies "INGO," Colonnade, and UNIQA.
It is noted that the initiative is supported by donors, including France, the United Kingdom, Norway, and the Taiwan Technical Cooperation Fund of the EBRD.
As part of the new EUR 110 million guarantee program for the recovery of Ukraine, the EBRD will provide international reinsurance companies with a guarantee covering specific war-related risks insured by Ukrainian insurance companies. The program is designed to utilize the existing market infrastructure and proven mechanisms of the insurance industry to provide the necessary protection for private sector investors, as stated in the release.
It is emphasized that the full-scale Russian invasion of Ukraine in February 2022 significantly restricted access to reinsurance services, as international companies largely ceased operations in the Ukrainian market. This, in turn, greatly limited the ability of Ukrainian insurance companies to offer commercial military risk insurance products.
The new program is highlighted as the first of its kind and will operate as an open platform through which various participants in the insurance market can access the guarantee. The global specialized reinsurance company MS Amlin is the first international partner in this market to join the bank's program. Through this program, the British company will be able to reduce the volume of relevant liabilities on its balance sheet, allowing it to renew active cooperation with Ukrainian insurance companies to provide critically needed military risk insurance.
It is clarified that at the initial stage, the program will include insurance for ground freight transport, damage to vehicles, and railway rolling stock. In the future, it may be expanded to cover other types of property based on market needs.
Considering that such policies are typically short-term, the program is designed for capital recycling, aiming to achieve cumulative coverage that exceeds the guarantee amount many times over depending on the actual number of policies sold and the frequency of insurance claims, the EBRD indicated.
"Preliminary estimates suggest that based on this approach, the bank's guarantee could provide insurance coverage totaling up to EUR 1 billion in goods and vehicles annually, which would have a significant economic impact," the EBRD predicts.
It is also noted that additional donor support has been promised by the European Union and Switzerland.
According to the release, the EBRD and Aon worked closely with the Ministry of Economy and the National Bank of Ukraine to prepare the program, particularly to ensure complementarity between the new initiative and other programs offered by various international organizations and the government of Ukraine aimed at expanding military risk insurance for Ukrainian companies and strengthening the Ukrainian economy.