Rethinking Insurance in Wartime Ukraine
The following material originally appeared in Insurance Day and is presented here with due credit to the publication.
Rethinking Insurance in Wartime Ukraine
The full-scale Russian invasion of Ukraine brought business across the country to an abrupt halt. In the first three months of the war alone, direct damage to Ukraine was estimated at USD 97 billion.[1] As of 31 December 2024, the latest assessments put the total direct damage at USD 176 billion, with the commerce and industry sector accounting for approximately 10 percent.[2]
The military aggression and resulting destruction naturally triggered a surge in demand for war risk insurance among businesses that continued operating in Ukraine. The “demand drives supply” principle did not immediately apply in this case though. Generally, war risks have been excluded from standard life and property insurance policies. Events such as shelling, landmine explosions, building destruction, and other war-related incidents typically fall under standard exclusions, relieving insurers of any liability to compensate for such losses.
That said, before 2022, it was possible to obtain policies covering war-related risks in Ukraine through international insurance syndicates. However, given the potentially catastrophic scale of losses resulting from active hostilities, foreign reinsurers distanced from the Ukrainian market immediately after the full-scale invasion began.
War risk coverage falls solely on Ukrainian insurers
While international reinsurers have been drawing further from the Ukrainian war risk market, domestic insurers have been making every reasonable attempt to try to manage the fallout on their own. However, the war renders traditional approaches to war risk insurance inapplicable.
For a time, it was virtually impossible to secure comprehensive war risk coverage in Ukraine. Insurance companies faced serious difficulties in pricing war risk coverage, as potential losses are nearly impossible to predict with accuracy. The extent and unpredictability of destruction made war risk insurance an inherently unstable product with a high risk of financial failure.
Eventually, insurers managed to identify patterns based on available data and started adjusting their products to reflect the realities of wartime conditions.
In 2023, Ukrainian insurance companies introduced commercial property products that no longer relied on international reinsurers. ARX Insurance was the first to take this step, introducing policies that cover risks related to missile strikes, drones, air defense systems, and shrapnel.
Despite all the limitations, the war risk insurance market has continued to expand. According to the CEO of the National Association of Insurers of Ukraine,[3] nearly the entire insurance market – comprising an estimated 50 companies – now offers some form of coverage for war-related risks.
Nevertheless, while there has been some movement forwards, the system still faces major challenges. Insurance payouts on the market are typically limited to USD 240,963.8 to 481,927.7,[4] while average annual premiums range from USD 6,024 to 10,843.3,[5] depending on the location of the insured asset. This system of compensation is not economically viable for either small or medium-sized businesses or large industrial enterprises with assets worth billions. It’s clear the national market alone cannot withstand the pressures of war risk coverage — without strong government backing and the support of global reinsurers, effective insurance simply is not possible.
Government response
To date, Ukraine has lacked a comprehensive mechanism for covering catastrophic risks, including war-related risks, through a mix of public and private funding. In hindsight, steps to develop such a system – or at least expand political risk coverage – should have been taken as early as 2014, in anticipation of the potential escalation of the conflict that started in eastern Ukraine.
Only in 2024, the National Bank of Ukraine, together with the Ministry of Economy, unveiled a proposal for a national war risk insurance system. The draft law introduces a three-tiered structure – obligations are shared among authorised insurers, a newly established State War Risk Insurance Agency, and international reinsurers.
In addition, the draft law identifies specific categories of assets that must be insured against war risks. Those include: (i) property pledged or mortgaged to banks, for the entire duration of the pledge or mortgage agreement; and (ii) construction projects, throughout the period of new construction, reconstruction, or major renovation.
Swift adoption of the law is not expected. Given the ongoing negotiation processes, the government is likely to wait for greater – to the extent possible – political stability before introducing a unified system.
International reinsurers and emerging support mechanisms
Following the onset of the full-scale invasion, international reinsurers ceased providing coverage for war-related risks – a standard practice globally. Further straining relations between Ukraine’s insurance sector and international reinsurers was the year-long ban on outbound reinsurance payments from Ukraine, imposed by the National Bank of Ukraine to preserve the country’s currency stability. While this measure was critically important in the early days of the war, it understandably led some non-resident reinsurers to withdraw from cooperation with Ukrainian insurers.
Nevertheless, there has been tangible progress in engaging international partners in specific projects and insurance products in Ukraine and this trend appears set to continue.
Since the 2022 invasion, the Multilateral Investment Guarantee Agency of the World Bank Group has provided political risk insurance in Ukraine, focusing on foreign investors. In late 2023, it issued its first war risk guarantee for the M10 Industrial Park in Lviv, covering up to USD 9.2 million.
Similarly, the U.S. International Development Finance Corporation (DFC) has also expanded war risk insurance tools for both foreign and domestic businesses. In 2024, DFC, together with AON and Ukrainian insurer ARX, launched a reinsurance mechanism allowing ARX to offer policies covering up to USD 2.5 million per asset. This coverage includes physical damage resulting from war, such as missile strikes and drone attacks. Additionally, DFC announced over USD 300 million in political risk insurance support for Ukrainian companies in agriculture and manufacturing.
Also in late 2024, the European Bank for Reconstruction and Development, together with Aon, launched a EUR 110 million program to support war risk insurance through the Ukraine Recovery and Reconstruction Guarantee Facility, initially covering inland cargo, motor vehicles, and railway stock. In addition, export credit agencies from various European countries are working on insuring their national companies’ investments in Ukraine. The Ministry of Economy of Ukraine is encouraging joint ventures and has prepared a portfolio of investment-ready projects aligned with international financial institution standards.
In fact, these initiatives serve not only as financial support for Ukraine’s insurance market. The involvement of international partners sends a clear signal to the global market that Ukraine is not entirely a red zone unfit for business activity – a strategic indicator that strengthens investors’ confidence.
[1] World Bank, Government of Ukraine, European Union, and United Nations. 2025. Ukraine Fourth Rapid Damage and Needs Assessment (RDNA4), February 2022 – December 2024. Washington, DC: World Bank. Available at: https://hdl.handle.net/10986/42908.
[2] Ibid.
[3] Interfax-Ukraine. 2024. “Up to 50 Insurance Companies in Ukraine Offer War Risk Coverage.” Interfax-Ukraine, 14 May 2024. Available at: https://interfax.com.ua/news/general/986790.html.
[4] According to the official exchange rate of the National Bank of Ukraine as of 16 May 2025, which is UAH 41,5 for USD 1.00.
[5] Ibid.
