Aon, US DFC launch re/insurance program to unlock and accelerate investment in Ukraine

Global insurance and reinsurance broker Aon has collaborated with the U.S. International Development Finance Corporation (US DFC) on a new $350 million insurance program designed to accelerate new capital investments and economic recovery in Ukraine.

As the war in Ukraine persists more than two years after Russia’s invasion, this first-of-its kind program enables the local insurance industry to price risk appropriately and attract much needed new capital into Ukraine.

The program includes a $50 million comprehensive reinsurance facility, coordinated by Aon, that enables the US DFC to reinsure war-related risks and advance insurance capacity in Ukraine. Aon worked 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.

So, DFC will act as the reinsurer for qualified insurers issuing policies in Ukraine and use its balance sheet to assume $50 million of war-related reinsurance risk in the country.

At the same time, Aon and DFC collaborated on an additional $300 million in war risk insurance policy designed specifically for Ukraine’s health care and agriculture industries. The broker says that this highlights the strong demand for accessible, affordable war risk insurance by private companies operating in Ukraine that will only increase during reconstruction.

Eric Andersen, president of Aon, at the Ukraine Recovery Conference in Berlin, said: “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.

“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 CEO, Scott Nathan, at the Ukraine Recovery Conference, said: “The U.S. Government is taking steps to help drive capital to the private sector in Ukraine. 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.”

It’s been confirmed that the first company to be certified as a qualified Ukrainian insurer 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 firms operating in Ukraine, and support ARX in expanding its war risk insurance offering in the country.

With the facility in place, Aon states that qualified insurance companies can select to provide rapid, on-the-ground war risk policies to businesses operating in Ukraine. In the long-term, this new facility can encourage private market participation in Ukraine by other reinsurance firms, promoting a foundation of private investment that will be essential to a recovery, says Aon.

According to the broker, U.S. Special Representative for Ukraine’s Economic Recovery, Penny Pritzker, was instrumental in galvanizing public and private sector support. Pritzker was appointed 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 September 2023.

“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. 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,” said Pritzker.