Aon and the European Bank for Reconstruction and Development launch innovative war risk insurance facility for Ukraine

Rhea-AI Summary

Aon and the European Bank for Reconstruction and Development (EBRD) have launched a €110 million war risk insurance facility for Ukraine. The initiative aims to revitalize Ukraine's war risk insurance market through a guarantee scheme supporting reinsurance capacity for international reinsurers and Ukrainian insurance companies.

The facility includes MS Amlin as the first international reinsurance partner, alongside three Ukrainian insurers: INGO, Colonnade, and UNIQA. Initially covering inland cargo, motor vehicle damage, and railway rolling stock, the facility could insure up to €1 billion worth of goods and vehicles annually. The program represents part of Aon's broader support for Ukraine's economy, contributing to over $465M in public and private capital for war risk insurance.

Positive

• Launch of €110 million guarantee scheme expanding war risk insurance capacity in Ukraine
• Potential to insure up to €1 billion worth of goods and vehicles annually
• Partnership with major reinsurer MS Amlin and three Ukrainian insurance companies
• Contribution to over $465M in public and private capital for war risk insurance

Negative

• None.

Insights

Financial Analyst

This innovative €110 million war risk insurance facility represents a significant development for Ukraine's economic resilience. The structure effectively addresses a critical market gap by providing reinsurance capacity that enables coverage for war-related risks. The facility's ability to potentially insure up to €1 billion worth of assets annually through capital recycling demonstrates substantial leverage potential.

The participation of major players like MS Amlin and three Ukrainian insurers adds credibility and operational viability to the program. The focus on essential sectors like inland cargo, motor vehicles and railway rolling stock targets key economic arteries. This facility, combined with Aon's previous $465 million commitment, shows meaningful progress in rebuilding Ukraine's insurance infrastructure.

Insurance Industry Expert

The facility's design as an open platform with transferable reinsurance exposure is particularly innovative in the war risk context. By enabling MS Amlin to transfer reinsurance exposure off their balance sheet, it creates a sustainable model for international reinsurers to re-enter the Ukrainian market. The inclusion of multiple Ukrainian insurers with extensive distribution networks ensures efficient market penetration and accessibility for local businesses.

The short-term policy structure allows for capital recycling, maximizing the guarantee's impact while managing risk exposure. This approach, combined with the backing of multiple international donors and coordination with Ukrainian authorities, creates a robust framework for sustainable market development.

• Builds on Aon's efforts to support Ukraine's economy, insurance industry and preparation for reconstruction – representing more than $465M in public and private capital for war risk insurance
• New €110 million guarantee scheme through the EBRD to provide reinsurance capacity for international reinsurers and Ukrainian insurance companies to cover war related risks in Ukraine
• Supports re-engagement of international reinsurers in the Ukrainian war insurance market and has attracted market interest with international reinsurer MS Amlin joined by three Ukrainian Insurance Companies: INGO, Colonnade and UNIQA

DUBLIN, Dec. 12, 2024 /PRNewswire/ -- Aon plc (NYSE: AON), a leading global professional services firm, and the European Bank for Reconstruction and Development (EBRD) have structured a tailor-made and highly innovative facility supporting the revitalization of the war risk insurance market in Ukraine. With support from Aon, the EBRD has launched a new guarantee designed to boost the provision of reinsurance capacity to private sector insurers, addressing the ongoing challenges posed by the war.

Under the new €110 million 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. The structure seeks to leverage existing market infrastructure and tested risk transfer mechanisms from the insurance industry to provide the protection private sector investors require. 

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.

The first-of-its-kind program is designed as an open platform that can transact with different insurance market participants that seek to benefit from the guarantee. The global speciality reinsurer MS Amlin is the first international reinsurance partner to join the EBRD facility. 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.

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, 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. 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.

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. Further donor contributions will enable the growth of the EBRD guarantee over time.

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. The facility is designed to be complementary of facilities offered by other international organizations and the Ukrainian government.

Odile Renaud-Basso, President of the EBRD, said: "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, 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 said: "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."

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 $465M 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. The firm also 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. 

About Aon
Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues provide clients in over 120 countries with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.

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FAQ

What is the size of AON's new Ukraine war risk insurance facility?

The facility consists of a €110 million guarantee scheme launched in partnership with EBRD.

How much coverage can AON's Ukraine insurance facility provide annually?

The facility can potentially insure up to €1 billion worth of goods and vehicles in transit each year.

Which Ukrainian insurance companies are participating in AON's war risk facility?

INGO, Colonnade, and UNIQA are the first Ukrainian insurance companies participating in the facility.

What types of assets does AON's Ukraine war risk facility cover?

The facility initially covers inland cargo, motor vehicle damage, and railway rolling stock, with potential for expansion based on market demand.

Which countries are backing AON's Ukraine insurance facility?

The facility is initially backed by France, the United Kingdom, Norway, and Taiwan, with additional support pledged by the European Union and Switzerland.