Insurance broker Aon and the European Bank for Reconstruction and Development (EBRD) have structured a €110 million (US$115.6 million) facility to provide reinsurance capacity for international reinsurers and Ukrainian insurance companies to cover war-related risks in Ukraine.
Under the Ukraine Recovery and Reconstruction Guarantee Facility, the EBRD will support global reinsurance companies through a guarantee covering losses on specific war-related risks underwritten by local Ukrainian insurers.
Russia’s full-scale invasion of Ukraine in February 2022 led to a significant reduction of reinsurance capacity available to the market, as international reinsurers largely withdrew from Ukraine, Aon said, noting that 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,” Aon said.
Indeed, the bank estimated that its guarantee could facilitate insurance cover for up to €1 billion ($1.1 billion) worth of goods and vehicles in transit each year, providing a significant economic impact.
1st Reinsurance Partner
Aon said the global speciality reinsurer MS Amlin is the first international reinsurance partner to join the EBRD facility, which will allow MS Amlin to transfer reinsurance exposure off its balance sheet, thereby enabling the UK-based reinsurer to re-engage with Ukrainian insurers to provide much-needed war risk cover.
The Ukrainian insurance companies INGO, Colonnade and UNIQA are among the first local market participants who will be actively driving the expansion of the product in the Ukrainian market. Given their wide distribution network, Aon said, it is expected that the facility will enable the provision of war risk coverage to businesses and small and medium-sized enterprises at scale.
Initially, the scheme will 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.
Since 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, Aon explained.
The facility is initially backed by France, the United Kingdom, Norway, and TaiwanBusiness – EBRD Technical Cooperation Fund. Additional donor support has been pledged by the European Union and Switzerland, which will enable the growth of the EBRD guarantee over time.
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. The facility is designed to be complementary of facilities offered by other international organizations and the Ukrainian government.
“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,” commented Greg Case, CEO of Aon, in a statement. “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.”
“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,” according to Odile Renaud-Basso, president of the EBRD. “This is crucial to giving businesses confidence that their assets are protected, which in turn will unlock and accelerate investment in Ukraine.”
Martin Burke, Chief Underwriting Officer, MS Amlin, said: “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 expressed confidence that this facility “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,” Svyrydenko added.
This latest announcement with the EBRD builds on Aon’s work over the last year to support Ukraine’s economy, insurance industry and preparation for reconstruction – representing more than $465 million in public and private capital for war risk insurance.
In June 2024, Aon worked with the U.S. International Development Finance Corporation to create a first-of-its-kind insurance program to support war risk policies for businesses operating in Ukraine. In September, the Aon and Marsh McLennan jointly called on the re/insurance industry to remove blanket exclusions for risks originating in Ukraine, Russia, and Belarus in order to help Ukraine’s resilience and catalyze economic growth.
Since February 2022, the EBRD has deployed €5 billion in Ukraine, focusing on supporting energy security, vital infrastructure, food security, trade and the private sector, alongside key policy reforms. The EBRD’s Board of Governors approved in 2023 a capital increase of €4 billion to support investment both in wartime and reconstruction.
Source: Aon
Photograph: Smoke rises in the background during a fierce battle on the frontline, as a farmer collects harvest in a field in the Dnipropetrovsk region, Ukraine, on Monday, July 4, 2022. (AP Photo/Efrem Lukatsky)
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