Aon joins forces with US on new $350m Ukraine war risk insurance programme
Global broker Aon has partnered with the US International Development Finance Corporation (DFC) to create a “first-of-its-kind” insurance programme worth $350 million to bolster capital investment and economic recovery in Ukraine.
Aon has coordinated a $50 million reinsurance facility, working closely with DFC and the Ukraine Ministry for Development of Economy and Trade to support the issuance of on-the-ground war risk policies to businesses operating in Ukraine. Aon and DFC also collaborated on an additional $300 million in war risk insurance designed for Ukraine's health care and agriculture industries.
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 DFC models: on-lending, which guarantees loans made by Ukrainian banks to facilitate lending to priority geographies and sectors; and insurance underwriting, especially for war and political risk.
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. Aon claims this facility can encourage private market participation in Ukraine by other reinsurers in the long term.
The announcement follows the September 2023 appointment of former commerce secretary Penny Pritzker to lead the US government's response to the war in Ukraine as the US special representative for Ukraine's Economic Recovery. In this role, Pritzker convened the private sector, multilateral banks and businesses operating in Ukraine to mobilise support for the Ukrainian economy.
Scott Nathan, DFC chief executive officer, said: “The US Government is taking steps to help drive capital to the private sector in Ukraine," said. "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.”
Eric Andersen, Aon president, said: “Capital will not go where it is not protected and this unprecedented programme with the US International Development Finance Corporation is intended to unlock and accelerate investment in Ukraine at a time when the need is most acute.
“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.”
Pritzker said: “As we looked for opportunities to support the Ukrainian economy, we recognised that a robust insurance market was essential to attracting investment in the country.
“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.”
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