Aon announces first-of-its kind, $350M insurance program to accelerate new capital investments and economic recovery in Ukraine

Rhea-AI Summary

Aon announced a $350 million insurance program with the U.S. International Development Finance (DFC) aimed at accelerating economic recovery and investment in Ukraine. This initiative includes a $50 million reinsurance facility to support war-related risks and a $300 million insurance capacity for Ukraine's healthcare and agriculture sectors.

U.S. Special Representative Penny Pritzker played a key role in garnering support from both the public and private sectors. Aon will collaborate with ARX, a Ukrainian subsidiary of Fairfax Financial, to build a war risk insurance portfolio for businesses in Ukraine. The program aims to attract new capital, ensure risk pricing, and promote private market participation for Ukraine's economic recovery.

Positive

• Aon announced a $350M insurance program to support Ukraine's economic recovery.
• The initiative includes a $50M reinsurance facility and $300M war risk insurance for healthcare and agriculture.
• DFC will act as the reinsurer for qualified insurance companies in Ukraine.
• ARX, a Ukrainian subsidiary of Fairfax Financial, is the first certified company to access the reinsurance facility.
• The program aims to price risk appropriately and draw new capital into Ukraine.

Negative

• High dependence on DFC’s balance sheet for $50M war-related reinsurance risk may pose financial risks.
• Potential challenges in rapidly deploying insurance policies in a volatile war environment.
• The effectiveness of the $300M war risk insurance in healthcare and agriculture sectors remains to be seen.

Insights

Financial Analyst

This announcement of a $350M insurance program, aimed at stimulating capital investment and economic recovery in Ukraine, has strong financial implications. The creation of a comprehensive $50M reinsurance facility, backed by the U.S. International Development Finance Corporation (DFC), significantly mitigates war-related risks for businesses. This move will likely attract private investment to war-affected areas, a important step for economic stabilization.

The collaboration between Aon and DFC to provide an additional $300M in war risk insurance, specifically targeting the health care and agriculture sectors, indicates strategic support for industries vital for humanitarian and economic recovery. However, investors should consider the long-term nature of such investments and potential political volatility.

Market Research Analyst

The introduction of this insurance program is a pivotal development for Ukraine’s market dynamics. War risk insurance, particularly in critical sectors like health care and agriculture, reduces the perceived risk for private enterprises, fostering a healthier investment climate. The certification of ARX as a qualified Ukrainian insurance firm marks a milestone in local capacity building.

As DFC leverages its models for on-lending and insurance underwriting, investors should monitor how this influences market confidence and capital flow into Ukraine. The effective implementation of this facility could set a precedent for similar initiatives in other conflict-affected regions, potentially reshaping global investment strategies.

Legal Expert

This insurance program also has substantial legal ramifications. By assuming $50M of war-related reinsurance risk, DFC supports the issuance of policies that cover politically and economically unstable environments. This framework not only provides a safeguard for investors but also aligns with international legal standards for insurance and reinsurance, ensuring compliance and fostering trust.

Moreover, the active involvement of U.S. Special Representative Penny Pritzker illustrates a coordinated public-private partnership which may enhance legal and regulatory stability. For stakeholders, understanding the legal intricacies and protections embedded in these insurance policies is essential, making this a robust legal precedent in conflict-zone investments.

• Comprehensive $50M reinsurance facility will enable U.S. International Development Finance Corporation to reinsure war-related risks and advance insurance capacity in Ukraine
• Aon and U.S. DFC collaborated on additional $300M in war risk insurance for Ukraine's health care and agriculture industries
• U.S. Special Representative for Ukraine's Economic Recovery Penny Pritzker instrumental in galvanizing public and private sector support

DUBLIN, June 12, 2024 /PRNewswire/ -- Aon plc (NYSE: AON), a leading global professional services firm, announced a $350M, first-of-its kind insurance program with the U.S. International Development Finance Corporation to build insurance capacity and accelerate new capital investment and economic recovery in Ukraine.

As one of the largest global brokers operating in Ukraine, Aon coordinated a comprehensive $50M reinsurance facility, working closely with DFC and the Ukraine Ministry for Development of Economy and Trade to support the active and ongoing issuance of on-the-ground war risk policies to businesses operating in Ukraine. Aon and DFC collaborated on an additional $300M in war risk insurance specifically designed for Ukraine's health care and agriculture industries.

"Capital will not go where it is not protected and this unprecedented program with the U.S. International Development Finance Corporation is intended to unlock and accelerate investment in Ukraine at a time when the need is most acute," said Eric Andersen, president of Aon, at the Ukraine Recovery Conference in Berlin. "This groundbreaking facility will enable the local insurance industry to appropriately price risk and draw much needed new capital into Ukraine, while creating capacity and capability in the country to support reconstruction."

DFC will act as the reinsurer for qualified insurance companies issuing policies in Ukraine and use its balance sheet to assume $50M of war-related reinsurance risk in Ukraine. The facility builds upon two well-established DFC models: on-lending, which guarantees loans made by local banks in Ukraine to facilitate lending to priority geographies and sectors; and insurance underwriting, especially for war and political risk. The additional $300M of capacity in war risk for Ukraine's health care and agriculture sectors highlights the robust demand for accessible, affordable war risk insurance by private companies operating in Ukraine that will only increase during reconstruction.

"The U.S. Government is taking steps to help drive capital to the private sector in Ukraine," said DFC CEO Scott Nathan at the Ukraine Recovery Conference. "The private sector is critical to Ukraine's recovery, and we are leveraging our unique tools, especially political risk insurance, to build investor confidence in Ukraine at this critical moment."

The first firm to be certified as a qualified Ukrainian insurance company to access the reinsurance facility is ARX, a Ukrainian subsidiary of Fairfax Financial. Aon, DFC and ARX will work together to build a portfolio of war risk insurance policies for companies operating in Ukraine and support ARX in expanding its war risk insurance offering in the country. With the facility in place, qualified insurance companies can select to provide rapid, on-the-ground war risk policies to businesses operating in Ukraine. In the long-term, this facility can encourage private market participation in Ukraine by other reinsurers, promoting a foundation of private investment that will be essential to a recovery.

The announcement follows the September 2023 appointment of former Commerce Secretary Penny Pritzker to lead the U.S. government's response to the war in Ukraine as the U.S. Special Representative for Ukraine's Economic Recovery. In this role, Special Representative Pritzker convened the private sector, multilateral banks and businesses operating in Ukraine to mobilize support for the Ukrainian economy and has been instrumental in advancing the work of Aon and the DFC to mobilize the insurance industry to bring $350M in private capital to support Ukraine's economy and recovery.

"As we looked for opportunities to support the Ukrainian economy, we recognized that a robust insurance market was essential to attracting investment in the country," said Pritzker. "This facility and the infusion of new private capital into Ukraine will help local businesses operate in the country today, while preparing Ukraine for reconstruction and further economic growth."

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 and sovereignties with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.

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SOURCE Aon plc

FAQ

What is the total value of Aon's new insurance program for Ukraine?

Aon's new insurance program for Ukraine is valued at $350 million.

How much is the reinsurance facility in Aon’s program?

The reinsurance facility in Aon's program is valued at $50 million.

Which industries in Ukraine will benefit from the additional $300M insurance?

The healthcare and agriculture industries in Ukraine will benefit from the additional $300 million insurance.

Who is the U.S. Special Representative for Ukraine's Economic Recovery?

The U.S. Special Representative for Ukraine's Economic Recovery is Penny Pritzker.

Which company is the first to be certified to access the reinsurance facility?

ARX, a Ukrainian subsidiary of Fairfax Financial, is the first company certified to access the reinsurance facility.