By Libby George
LONDON (Reuters) – The European Bank for Reconstruction and Development is launching a 110 million euro guarantee to jumpstart war risk reinsurance for inland transport in Ukraine.
The bank estimates the scheme could facilitate insurance cover for over 1 billion euro worth of goods and vehicles in transit each year – its latest effort to boost Ukraine’s economy as it approaches its third year of war with Russia.
The plan, in partnership with Aon (NYSE:AON), aims to get global reinsurance companies, which have largely excluded Ukraine, Russia and Belarus since last year, to guarantee local losses. That would allow Ukrainian insurance companies to get some exposure off their books – and thus offer more coverage.
“This facility should make insurance more accessible,” said Francis Malige, EBRD’s Managing Director for Financial Institutions, adding that capacity in Ukraine’s insurance market is extremely limited. “We are trying to kick start a market here.”
EBRD said that international reinsurer MS Amlin would participate in the donor-backed scheme, along with Ukrainian insurance companies INGO, Colonnade and UNIQA.
Malige said the scheme targeted inland cargo, motor vehicle damage and railway rolling stock, as there is capacity to cover it – in contrast with “fixed” assets such as energy infrastructure, which have been frequent targets of Russian attacks.
There is already a scheme backed by the Ukrainian government to cover marine war insurance.
Other international lenders and governments, as well as Ukranian banks and insurance companies, have tried to develop other war-risk insurance systems, but the elevated, unpredictable risks have meant high premiums – and thus limited uptake.
Malige said that the aim was to help reinsurers understand the risk, and become more comfortable with it, “so that with the same pot of money, we can cover much larger scope of assets in the country.”