Aon and the European Bank for Reconstruction and Development (EBRD) have launched a facility supporting the revitalisation of the war risk insurance market in Ukraine, with global speciality reinsurer MS Amlin the first international reinsurance partner to join.
Under this new €110 million Ukraine Recovery and Reconstruction Guarantee Facility, the EBRD will reportedly support global reinsurance companies through a guarantee covering losses on specific war-related risks underwritten by local Ukrainian insurers.
The “first-of-its-kind” program is designed as an open platform that can transact with different insurance market participants who seek to benefit from the guarantee.
“The structure allows MS Amlin to transfer reinsurance exposure off their balance sheet, which enables the UK-based reinsurer to re-engage with Ukrainian insurers and provide the much-needed war risk cover,” Aon explained.
The firm continued, “Russia’s full-scale invasion of Ukraine in February 2022 has led to a significant reduction of reinsurance capacity available to the market, as international reinsurers have largely withdrawn from Ukraine.
“This left local insurers considerably limited in their ability to offer commercial war risk insurance products. By making war risk insurance more accessible, the facility will stimulate business activity and economic growth, paving the way for Ukraine’s recovery and reconstruction.”
As per Aon, Ukrainian insurance companies INGO, Colonnade and UNIQA are among the first local market participants of the product.
The scheme will initially cover inland cargo, motor vehicle damage, and railway rolling stock, with the flexibility to expand to a broader range of assets based on evolving market demand.
“As such, insurance policies are generally short-term, the facility will be able to recycle capital and provide coverage for a multiple of the guarantee amount, depending on the number of policies sold and the frequency of claims. Based on this approach, the EBRD’s guarantee may insure up to EUR 1 billion worth of goods and vehicles in transit each year, driving significant economic impact,” Aon explained.
The facility is backed by France, the United Kingdom, Norway and TaiwanBusiness–EBRD Technical Cooperation Fund. Meanwhile, additional donor support has been pledged by the European Union and Switzerland.
Moreover, EBRD and Aon have coordinated closely with the Ukrainian Ministry of the Economy and the National Bank of Ukraine to ensure the provision of war risk insurance policies to Ukrainian companies and to further strengthen the Ukrainian economy.
Odile Renaud-Basso, President of the EBRD, commented, “This is a significant milestone for Ukraine and a testament to the EBRD’s unwavering commitment to supporting the country’s real economy.
“The EBRD’s guarantee will enable private sector reinsurers to re-engage on Ukrainian war risk and build a resilient insurance market in Ukraine. This is crucial to giving businesses confidence that their assets are protected, which in turn will unlock and accelerate investment in Ukraine.”
Greg Case, CEO of Aon, said, “Aon’s steadfast commitment to Ukraine compels our firm to continue to identify new opportunities for businesses to invest in the country during the ongoing war.
“This innovative new facility in collaboration with the European Bank for Reconstruction and Development further enhances the stability of the insurance market in Ukraine and strengthens the foundation for economic resiliency and growth.”
Martin Burke, Chief Underwriting Officer, MS Amlin, added, “We are proud to support this innovative solution, providing much-needed reinsurance capacity to help the domestic Ukrainian insurance market rebuild itself and support local businesses and clients.
“One could not find a better expression of our company purpose, providing continuity in uncertain times, than through our commitment to this scheme.”
Yulia Svyrydenko, first Deputy Prime Minister, Minister of Economy of Ukraine observed, “We are sincerely grateful to the EBRD and all parties involved in launching this insurance mechanism. The market has been eagerly anticipating it.
“I am confident that this mechanism will provide much-needed support for small and medium-sized businesses, which have been severely affected by the war.
“It will help attract investments into the Ukrainian economy and serve as a signal to other market players that new insurance mechanisms can and should be implemented, as there is clear demand from the private sector.”
