The Ukrainian Insurance Business Association participated in Insurance Sweden Annual Conference 2023: Crisis and war - what is the role of the insurance industry? Vyacheslav Chernyakhovsky, general director of the association, presented the topic "How do insurance companies handle the challenges of an ongoing war".

He started by describing the overall situation in the national insurance market.

Key indicators of the Ukrainian insurance market

The main indicators-2020:

• GDP, current prices, EUR billion - 136,1
• GDP per capita, current prices, EUR - 3260
• Gross written premiums in insurance, EUR million- 1481
• Level of insurance penetration in GDP - 1, 08%
• Insurance density (EUR per capita) - 36

Since 2011, insurance penetration has declined by 0.65 percentage-point up to 1%, despite the targets stated by the National Bank of Ukraine to increase the indicator.

During the last three years, the number of insurance companies in Ukraine has decreased from 210 to 126.

The decrease in the number of insurance companies and the amount of premiums was caused not only by war (in 2022) but also by transferring the regulatory power to the National bank and by the Covid pandemic. Insurance companies have been leaving the market - not only because of the consequences of the war but also because of excessive and redundant regulatory requirements.

The volume of life insurance has not fallen as much because there are long-term contracts, which most clients are willing to renew. However, new life insurance contracts have fallen very significantly.

Premiums by insurance business lines, billions UAH and millions USD, 2018-2022


Inflation-adjusted insurance premiums, main lines (97%), 2021-2022


Vyacheslav Chernyakhovsky described the main challenges faced by Ukrainian insurance companies during the war:

• Some of the offices of companies registered in cities in the East of Ukraine and branches were damaged or even destroyed or ended up in the occupied territories and were looted.
• Part of the employees of the companies were injured during the missile and artillery attacks, drafted into the Defence Forces, some went missing or have been in the occupied territories for more than a year.
• In the first weeks of the war, some employees could not work normally because they had to evacuate their families to the western part of Ukraine or abroad.
• Employees were ready to work even from bomb shelters - but most of these structures or those that replaced them (underground parking lots, basements, subways) were generally poorly equipped and did not have an Internet connection.
• Problems with power supply, communication and the Internet (especially noticeable in the first months of the war and in the fall of 2022 and the winter 2023 during the massive missile attacks of Ukraine)

According to our surveys in March 2022, only 5% of companies continue to work without problems. About 60% of companies continue to work despite difficulties. Almost a third have interruptions in their operations and can only work partially. Almost 10% of companies cannot continue to operate?, - he said.

He also emphasized that this year most insurance companies operating in the Ukrainian market have managed to stabilize their activities.

The Ukrainian economy has been suffering huge losses during the war, but I am proud to say that the insurance market continues to operate and fulfill its obligations to people and businesses who have entrusted insurance companies with their financial protection.

"The payment procedure has not changed much. At the beginning of the war, the requirements for the provision of documents were significantly simplified (they could be submitted remotely, photocopies instead of originals, etc.). For MTPL, the first two or three-quarters of the settlement period lengthened for obvious reasons. But already from the 4th quarter of last year, these dates became close to pre-war".

The force majeure clause was sometimes used in the early months of the war so that insurance companies would not fall under penalties due to violations of the deadlines established by law or contracts.

Force majeure is very rarely used as a reason for refusing payment to an injured person or business partner, I only know of isolated cases. In general, insurers continue to cover damages.

Damages caused by missiles, bombs, shells and Russian marauders have been refused because 99% of contracts did not include war risk insurance. Such losses are now being identified and hopefully, our citizens and businessmen will be compensated at the expense of the aggressor country and its frozen assets.

A year ago, EUR 100 million were already claimed for war risks, under contracts that were concluded before the new phase of the war, and where the availability of such coverage was stipulated.

One large foreign reinsurance company left the Ukrainian market and terminated all contracts for all life insurance policies, citing force majeure.

On the other hand, some Ukrainian insurance companies have removed the military risk exception for life and health insurance for civilians who are far from the front line.

"The main approaches that helped to keep the business running have been general stress resistance: we live in a country where various crises occur regularly", says Vyacheslav.

He also highlighted remote work skills: as a result of the Covid-19 pandemic, the national insurance business was well adapted to remote work at the time of the war. We had experience not only in daily, operational activities online, but even in holding shareholders' meetings, meetings of the Association's members and MTIBU members remotely. Vyacheslav also mentioned a high overall level of digitalization in Ukraine: for example, many people have electronic digital signatures, even individuals, which allows for remote document flow.

There were also some specific steps have been implemented by regulators and market players:

• Business associations appealed to the NBU with a proposal to temporarily ease regulatory requirements, in particular in terms of reporting and imposing penalties for violations
• Companies that were closest to the regions of active hostilities partially or completely relocated employees to safer regions of the country or abroad
• Moving servers to a safe location and transferring key information to cloud storage
• Digital settlement was implemented as actively as possible, in particular, temporarily significantly simplified requirements for documents certifying the occurrence of an insured event
• It was necessary to give way to document flow standards in the direction of its simplification

"Our association tries to do what we did before the war and additionally help companies cope with new military challenges. As I mentioned, we initiated and insisted that the NBU take a number of steps to reduce requirements for insurance companies during the war, a temporary moratorium on sanctions for late reporting, etc. And now we are discussing the need for a global easing of requirements both for the war period and for the post-war reconstruction of the country and the economy.

We are struggling to expand the insurance market, including by introducing some lines of business that are actively used in European countries, for example, professional liability insurance for doctors and other types of liability.

We help to solve the operational problems of specific companies - searches for personnel, mergers and acquisitions, and methodological issues.

At the beginning of the war, together with our colleagues from foreign associations, we organized targeted personal assistance with overseas evacuations and accommodation for employees and families of insurance companies that are part of our association", says Vyacheslav.

The most important lesson learned by Ukrainian insurance companies from operating under the war pressure

"We have a great saying: "Hope for the best, count on the worst". When planning, management and risk managers need to consider the most pessimistic scenarios as well, no matter how psychologically difficult it may be. The most important lesson is that there should be a plan of action in case of a critical situation (war, natural disaster, pandemic, terrorist attacks). This plan may not be ideal and adjusted according to the real situation, but it must be there", Vyacheslav added.

The main practical step in the main presentation - duplication (backup) and ensuring the safety of information, including the location of such copies of data abroad.

What many Ukrainian companies would definitely do differently to prepare for war is to make sure that companies do not have a situation where critical business units are staffed exclusively by men. They could be drafted into the army at any time, and it would make it very difficult to run the business.

Key points for securing the business of any country in case of war.

At the strategic level:

• Governments should provide clear information and forecasts-signals to businesses in the event of a military threat (to avoid what happened in Ukraine with the President's promise of "barbecue for the May holidays"). This will enable companies to be adequately prepared to different scenarios
• Response plan at the level of the industry regulator on general issues: paying taxes, submitting reports, conducting audits during wartime, etc.

At the level of individual companies:

• Business digitalization and remote and distributed team skills
• At least basic energy independence of offices
• Duplication of all key business information in cloud services, including on servers in other countries
• Systematic, daily backup of information
• Creation and work out crisis scenarios with staff in advance - It can be not only a military threat but also a natural disaster/ terrorist attack.

The role of Insurance in post-war recovery

"The role of insurance in post-war recovery will be one of the most important, as investors and investments will only come in if there is insurance protection, including against military and political violence risks", stated Vyacheslav, considering the result of the survey among prospective investors in Ukraine.


In addition, people's living standards have fallen during the war, and therefore the ability to insure against significant financial losses will be important

According to our estimates, in 4-5 years after the end of the war, the insurance market will return to the level of 2021 (if there are all-national programs of economic development)

Vyacheslav emphasizes, that first, the Ukrainian insurance market needs capacities both for reinsurance for the main types of business, and for reinsurance of military risks (direct and secondary - abandoned ammunition, mines, etc. in the territory where there have been no military operations for a long time), and we need to start working in this area before the war is over.

Ukrainian insurers and professional unions are interested in methodological cooperation, including showing the NBU on the example of specific cases how the principles of proportionality in solvency, regulation and supervision are applied in practice, as well as supporting national companies, including at the regional level.

"We also have an idea to create a fund to support Ukrainian insurance companies with revolving funding instruments. The fund could provide additional revolving financial resources to Ukrainian insurance companies (ICs), enabling them to continue and intensify their operations. We have a ready-made concept and mechanism for the operation of such a fund, and we are trying to find sources of financing for it".

"Ukraine would not be able to resist the enemy if it were not for the support of progressive humanity, primarily from European countries and the USA. I would like to thank the government and people for their military, humanitarian and financial assistance to my country, and for helping refugees who were forced to flee Ukraine to escape Russian aggression.

I hope that no country will ever need such an experience. However, we understand that the world is becoming more and more turbulent, and the skills of adaptation and business management during crises of any nature - natural, social, economic - are important to overcome modern challenges", he wrapped up his presentation.

About Insurance Business Association

The Insurance Business Association is an association of participants in the insurance market of Ukraine, which was established in 2004.

The Association includes 33 insurance companies. These companies with Ukrainian capital have been successfully operating on the Ukrainian market for a long time; there are many regional insurers among the participants.

Members of the Association are included in the management and control bodies of the MTIBU (Motor (Transport) Insurance Bureau of Ukraine), the Nuclear Insurance Pool of Ukraine.

The share of member companies of the Association in the MTPL market is 17 insurance companies in MTIBU, more than 45% of the total number of MTPL market participants.

The full presentation is available for download here.