The Central Bank of Ukraine, the National Bank of Ukraine, the Ministry of Economy, and the Ministry of Finance will present the draft law of Ukraine “on military risk insurance system” to the business community, and Ukraine will continue consultations until December 2024 and beyond. is. Submit the bill to the relevant committee of Congress.
In addition to generalizing the rules on how the war insurance market operates in Ukraine, the bill will also create a State War Risk Insurance Agency, the Ministry of Economy reported on its website.
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This would allow the creation of a mass-market war insurance product within Ukraine, allowing domestic and foreign investors to apply for compensation in the event that Russian forces destroy their assets.
War insurance will be financed by both Ukraine and donors. Ukraine plans to create a cumulative mandatory insurance payment pool. Donors also plan to provide financial support.
Representatives of the state held their first meeting with the National Association of Banks of Ukraine, the National Association of Insurance Companies of Ukraine, the European Business Association and the American Chamber of Commerce in Ukraine. According to the National Bank of Ukraine’s Facebook post, they are also planning a meeting with the Union of Entrepreneurs of Ukraine (SUP, Spilka Ukrajinskykh Pydpryjemtsiv) and the Federation of Employers of Ukraine.
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Katerina Roshkova, First Deputy Governor of the National Bank of Ukraine, presents the war insurance bill. Source: Facebook of the National Bank of Ukraine.
Why Ukraine needs its own war insurance agency
The State War Risk Insurance Agency will develop a common policy on risk assessment and consolidate existing projects into one system. Currently, investment projects in Ukraine can be insured against war risks by the US agencies DFC and MIGA, as well as by the Ukrainian Export Credit Agency. Vessels exporting goods and goods can be insured through Unity’s ship insurance mechanism.
However, the insurance for the above agencies is complex, and the agency takes a long time to study the business model of the investment project.
Ukraine needs a unique product that has simpler policies and can significantly reduce the time required for due diligence. “Mass-market war insurance products will allow companies to enter into contracts with more confidence,” Yaroslav Horubushko, capital markets director at CBRE Ukraine, told the Kyiv Post in May 2024. spoke.
Oleksiy Sobolev, First Deputy Minister of Economy of Ukraine, presents a national bill on war insurance. Source: Ministry of Economy.
How does the State War Risk Insurance Agency work?
As an underwriting policy, state authorities determine common policies regarding risk assessment and acceptance of insurance companies already participating in the market. According to a statement from the Ministry of Economy, it will develop standardized insurance products, decide on a centralized approach to pricing and maintain a single central database within the military risk insurance system.
Ukraine’s war insurance service covers the risks of physical damage caused by war. The bill would also impose compulsory war insurance on mortgages and property for home construction. According to the Ministry’s report, the list of items to be insured is not yet finalized.
Ukrainian government agencies will first provide reinsurance to domestic institutions to protect them from undue risks. Katerina Rozhkova, First Vice-President of the National Bank of Ukraine, said in a presentation that after some time foreign insurance will be able to participate in Ukraine’s national war insurance system provided for in the draft law.
“Our goal is to consolidate all existing programs into a single pool, create clear rules of the game, and ultimately be able to attract international reinsurers to this market. “, the press release quoted Oleksiy Sobolev, Ukraine’s First Deputy Minister of Economic Affairs, as saying.