UKRAINE: the war makes the risks for Ukraine's sector continue to spiral

31 May 2022 — Marina MAGNAVAL
The war has created unprecedented operational and financial risks, and the risks for Ukraine's sector continue to spiral. Companies are not only worried about employee safety and business continuation, but the growing solvency, inflation and liquidity risks, according to the Leaders from Ukraine's Insurance Business Association and European Insurance Alliance.

"The insurance market has suffered significant losses but most insurance companies will continue to operate: offices have either been moved to western Ukraine, or employees are working remotely from different parts of Ukraine and even from cities outside the country. Research conducted by our organization with 15% of insurers in Ukraine shows two-thirds of companies have seen their revenues drop by 50% to 90%. 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. Marine insurance does not work, because now it is impossible for ships to enter Ukrainian ports. Aviation insurance has completely stopped. Travel, motor and property insurance have all but stopped. There are corporate clients who continue to work and pay regular premiums. The insurance market of Ukraine is now on the verge of a huge crisis, as the bulk of solvent customers have left for abroad and the timing of their return to Ukraine is still unclear", says Vyacheslav CHERNYAKHOVSKY, general director of Ukraine's Insurance Business Association.

According to Maryna VORONIANSKA, head of the managing board at non-life and health insurer European Insurance Alliance, "There are different reactions. The NBU has requested international reinsurers to continue provide reinsurance protection without payments, since Ukraine has introduced a ban on transferring foreign currency abroad. Therefore, insurers cannot make payments under reinsurance agreements. In addition, on 3 March, the NBU asked international reinsurers and brokers to stop working with Russian insurers. Russia has decided to ban cooperation with Western reinsurers, which we only welcome. On the positive side, Ukrainian citizens can travel abroad in their own cars without insurance green cards as a result of agreements reached by the NBU, the Ministry of Foreign Affairs of Ukraine and state bodies of Poland, Slovakia, Hungary and Moldova, etc. This step is very important and timely", she said.

Vyacheslav CHERNYAKHOVSKY also explained that the NBU has so far decided to not apply penalties for late reporting, for violation of capitalization requirements and for violation of a number of requirements under license conditions. The insurers are not subject to measures for violation of the mandatory criteria for the adequacy of regulatory capital and solvency, liquidity, profitability, assets and operational resilience.

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