20:45 08.03.2023

It's more profitable for state to transfer part of costs of insurance of war risks, exporters to Ukrainian companies than to spend budget funds – expert

3 min read

 If the state decides to participate in insurance of war risks, it can partially compensate the costs of insurance payments to ship owners or exporters using the usual market mechanisms - through commercial insurance in Ukrainian insurance companies, which will be cheaper, more transparent and will not create uncertain risks for a very deficit budget of 2023, according to a press release from the Insurance Business Association.

According to it, this opinion was expressed by Viacheslav Cherniakhovsky, the general director of the Insurance Business Association, during a meeting of the Anti-Crisis Headquarters and the board of the Ukrainian League of Industrialists and Entrepreneurs with the participation of representatives of the Verkhovna Rada, the government, the NBU, structured associations and organizations of industrialists, entrepreneurs, employers, trade unions.

He criticized the proposal to insure war risks at the expense of the state Export Credit Agency (ECA), enshrined in the draft law on amendments to the law of Ukraine on financial mechanisms for stimulating export activities to insure investments in Ukraine against war risks.

"MPs believe that in this case, the insurance coverage of war risks does not require additional funding from the state or local budgets, this is possible only if no payments are made, which, of course, is an unrealistic situation," Cherniakhovsky said.

At the same time, he clarified that the funds of the ECA's charter fund are funds provided from the country's budget, and there is no need to figure out how to spend budget money to compensate for losses, when these risks can be secured using the usual market mechanisms - commercial insurance in Ukrainian insurance companies.

According to him, rather unpleasant signal is the intention to use the state budget instead of developing market mechanisms. Thus, on February 24, the Verkhovna Rada adopted amendments to the state budget (draft law No. 8399), which provide for the possibility of compensation for the owners of ships that sail in inland waters if they are damaged or destroyed by Russia. The total amount of compensation is up to UAH 20 billion this year. It is allowed to use the Road Fund as a source of payments by the Cabinet of Ministers.

"A similar scheme - the creation of a budget fund to provide guarantees - was already introduced a year ago, just before the start of the large-scale aggression, for aviation. As far as I know, not a single foreign airline agreed to use it, but worked solely because of insurance of all risks, including war, or refused to fly to Ukraine," he recalled.