Ukrainian insurance market "on the verge of a huge crisis"
30/03/2022, 17:25 Ukrainian insurance market "on the verge of a huge crisis" | InsuranceERM
Leader from European Insurance Alliance tell Cintia Cheong how the country's insurers are coping with the operational and financial impacts of the war Amid a desperate situation in Ukraine, there is an insurance industry doing its best to support the economy and the war effort – and keeping itself going. Since the invasion by Russia on 24 February, the country's insurance sector has been fighting on many fronts. The war has created unprecedented operational and financial risks. Along with the obvious disruption caused by military action, Ukraine declared martial law and imposed financial measures, including a moratorium on cross-border foreign currency payments. On the other hand, there has been some relief from regulatory requirements. Insurers have also campaigned for Western companies to support them by cutting ties with Russia. But 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. In this Q&A, Maryna Voronianska, head of the managing board at non-life and health insurer European Insurance Alliance, explain how the sector is coping with the situation and what they think of Western insurers' response to the Russian invasion.
Can you explain your situation at the moment? Are you, your family and your colleagues safe? How have you been able to continue working?
Maryna Voronianska: Everyone makes efforts and contributes towards winning the fight by keeping the economy functioning, including the insurance business, which is also having a hard time right now. My family and I stay in Ukraine and try to work and help our army.
Have insurers been able to continue doing business since the war began? Are staff able to work? Are new policies being written? Are claims being paid?
MV: The insurance market has suffered significant losses since the beginning of the war, but insurers, including our company, continue to work. Most of the staff have found the opportunity to work remotely since the outbreak of the coronavirus pandemic. So, depending on the situation in the region, some work remotely, some are in the office. Undoubtedly, there is a significant drop in payments. Voluntary medical insurance and motor third-party liability agreements are in the greatest demand. Insurers are making payouts despite force majeure announcements by the Ukrainian Chamber of Commerce and Industry.
Are Ukrainian insurers able to help society in other ways, for example with the humanitarian crisis resulting from the war?
MV: Insurance workers have joined the ranks of the Armed Forces of Ukraine, many to the Territorial Defence Forces. Some work with volunteers, like all conscientious citizens of Ukraine. Our company has also transferred funds to support the Armed Forces of Ukraine.
What do you think of the Western insurers' response to the Russian invasion? Do you welcome the decision by many insurers to sell their Russian assets and withdraw from Russian business? What more can be done to help?
MV: 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. The alienation of the assets of Russian insurers is certainly supported. This is a bloody business.
The new Insurance Law became effective on 19 December 2021. However, the market was given a two-year period (i.e., by 1 January 2024) to align with the new requirements. Has the crisis affected insurers' implementation of the requirements?
MV: Of course. It is likely there will be a need to revise its terms and the period of enactment, since many of the new conditions of the law should have been implemented in a stable economy. At the same time, the insurance market will clearly need to recover from the financial crisis after the victory. We certainly look forward to the support of our Western partners in the future, and we are sure that the restoration of the country will serve as a significant impetus for the development of the insurance market.
How has the war affected Ukrainian insurers' solvency?
MV: The NBU has temporarily lifted sanctions for insurers' violation of solvency indicators, asset quality and a number of other indicators. The current situation is difficult for insurers [as] there is a significant drop in premiums. However, we are all working hard to maintain the business, maintain customer confidence and the credibility of the financial sector. For our firm, the reserves have been formed in full and solvency indicators are being met.