NBU expects mechanism of war risk insurance to come into effect in 2024

In cooperation with partners, the National Bank of Ukraine (NBU) is working to launch a mechanism of war risk insurance. Before June 2024, the regulator is planning to fully develop a draft bill adjusting this mechanism, and hopes for it to come into effect as soon as this year.

The relevant statement was made by NBU First Deputy Governor Kateryna Rozhkova during the conference ‘Finance for Business in Wartime’, an Ukrinform correspondent reports.

“We have finalized and agreed on the concept of creating a mechanism of war risk insurance. It has been a long-term work that we started with the support of the World Bank back in 2022. Today, the concept and the mechanism itself have been approved by our major sector-specific partners, such as the Economy Ministry and the Finance Ministry,” Rozhkova told.

According to Rozhkova, it is a fully functional mechanism, which can be launched as soon as now and will continue to work for many years after the invasion ends, as security risks will persist.

Currently, the concept provides for granting the compulsory insurance against war risks to a certain range of objects, and the list of war risks themselves will be very limited at the initial stage.

“At the first stage, we are talking about direct material losses due to hostilities,” Rozhkova noted.

In her words, compulsory insurance will allow a large number of objects to get involved in this process, which will help to reduce the cost of insurance. Three levels of coverage are expected: domestic insurance companies, government agency, and Western reinsurance companies.

Rozhkova emphasized that, in order to launch the war risk insurance mechanism, Ukraine needs to adopt a special law.

“The World Bank, the European Commission, the European Bank  for Reconstruction and Development, and other international partners, including international reinsurance brokers, have already contributed to the development of this mechanism and expressed their full readiness to provide us with all technical assistance when making a bill. […] We are planning to complete this draft bill before June,” Rozhkova explained.

She expressed hope for this mechanism to come into effect as soon as this year.

“It will be that very powerful component, which will allow businesses and banks to feel confident and restore economy,” Rozhkova concluded.

A reminder that, in autumn 2023, the World Bank’s Multilateral Investment Guarantee Agency (MIGA) provided the first investment guarantees for private investors in Ukraine.