Aon announces $350m Ukraine war risk programme

Aon has announced a $350m “first-of-its kind” insurance program with the US International Development Finance Corporation (DFC) to build insurance capacity and accelerate new capital investment and economic recovery in Ukraine.

Aon has coordinated a “comprehensive $50m reinsurance facility”, working closely with DFC and the Ukraine Ministry for Development of Economy and Trade, to support active 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, the broker said.

Aon’s announcement was timed for its attendance at the Ukraine Recovery Conference being held this week in Berlin, after a similar event took place last year in London.

“Capital will not go where it is not protected and this unprecedented program with the DFC is intended to unlock and accelerate investment in Ukraine at a time when the need is most acute,” said Eric Andersen, president of Aon, speaking 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,” Andersen said.

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, Aon explained.

The facility builds upon two 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”, Aon noted.

“The U.S. Government is taking steps to help drive capital to the private sector in Ukraine,” said DFC CEO Scott Nathan, speaking 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,” he said.

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, Aon said the facility could 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 US government’s response to the war in Ukraine as the US special representative for Ukraine’s economic recovery.

Aon credited Pritzker as “instrumental in galvanizing public and private sector support” for the scheme.

In this role, she 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 mobilise 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,” she added.