Opinion: Denis Yastreb, CEO, National Association of Insurers of Ukraine
24 February 2022 is a day that divided reality. A full-scale war in Ukraine became a reality. Panic, horror, confusion, fear for the lives of relatives, hatred for the enemy – this is just some of the emotions experienced by every Ukrainian on that day and every day since. It is 2024 and as the war continues, we can now look back and describe how the insurance market in Ukraine is responding. The main factors that had an impact on the insurance market and insurers during 2022 to 2023 are the following:
An attempt to seize the capital of Ukraine – Kyiv
At the beginning of the full-scale war, Ukrainians were in a situation of complete uncertainty. At the end of February and in the first few weeks of March 2022, the industry dealt with the safety of employees and their families, office relocation, data storage, and material and technical resources.
In March and April 2022, the level of business activity was minimal, which led to minimal insurance premiums in almost all business lines. There was also a significant decrease in insurance payments. According to members of the National Association of Insurers of Ukraine (NAIU), the maximum fall in premiums was recorded in March 2022: minus 52% compared to March 2021, but from May there was a trend towards recovery (May 2022 v May 2021 minus 14%).
But now, according to the National Bank of Ukraine data, premiums increased by 12.4%. This rise is mostly due to inflation, although in the euro area the increase is less, at 3.9%
Currency restrictions in Ukraine since February 2022
As part of anti-crisis measures, currency restrictions were introduced in Ukraine, which made it impossible to make settlements with foreign reinsurers throughout 2022. Thanks to the support and understanding of reinsurers in 2022, it was possible to keep the situation under control and most reinsurance programmes continued to operate. The liberalisation of currency restrictions took place in early 2023. As a result, insurers that confirmed their financial stability and transparency of the ownership structure were able to make settlements with foreign partners.
According to the results of 2022, the share of reinsurance premiums to foreign partners decreased by almost 38% compared to 2021, but for nine months of 2023 the situation was different and there was a 16% increase in the payment of reinsurance premiums to foreign reinsurers. According to the results of the first six months of 2024, the share of reinsurance premiums to foreign partners shows a 6.3% increase in comparison to six months in 2023.
Easing regulation for insurance companies from March 2022
Since March 2022, the National Bank of Ukraine (NBU) has introduced regulatory relaxations for insurers, which, in turn, have made it possible to quickly adapt to activities during the war. Another factor that needed to be taken into account during the rapid adaptation to the new business environment was the experience of establishing remote processes during quarantine restrictions caused by COVID-19.
During the summer of 2022, insurers were able to resume their activities, and the gradual recovery of business activity in Ukraine made it possible to achieve a consistent positive trend towards the resumption of insurance activities. According to results, within the first six months of 2024 (NBU data) there was an increase of 3.6% (EUR) in Gross Written Premiums (GWP) compared to the first six months of 2023.
Mass displacement of the population of Ukraine abroad
Active hostilities led to the massive displacement of the population of Ukraine abroad, which led to an unprecedented increase in Green Card (or International Motor Insurance Certificate) insurance premiums which confirms third party insurance cover when travelling abroad. Accordingly, in 2022 the amount of collected insurance premiums for this type of insurance increased by 124.7% and amounted to EUR 102 million in 2023, an increase of 25.4% and the total amount of collected insurance premiums was EUR 118.2 million.
The change in the geography of citizens' stays compared to the years before the full-scale invasion also led to an increase in the level of insurance indemnities.
Since then, the peak of the growth of the Green Card has passed and, according to the results of 2023, the number of signed contracts has decreased by almost 30,000. In fact, according to results of the first six months in 2024, Green Card applications have shown a 1.2% decrease.
Significant damage due to missile strikes and drone attacks
Damage due to missile strikes and drone attacks has led to an increase in demand in the insurance sector. During 2022, insurers had the opportunity to collect statistical information necessary for the formation of new insurance products or the expansion of coverage within existing products. Starting in the autumn of 2022, offers from insurers for individuals have been launched on the market, covering life and health risks, damage to housing and vehicles because of missile strikes, drone attacks, blast waves, fragments of missiles and drones.
In 2023, insurers began to offer this coverage for small and medium-sized businesses. Coverage of part of the war risks is carried out within the insurers’ own maintenance and has restrictions on the territory and limits within the insured amounts.
The risk is not covered in territories where active hostilities are taking place, including occupied territories or near the borders with the enemy. Risk coverage is limited to life and health from EUR 1,000 to EUR 35,000; real estate of individuals up to EUR 50,000; and vehicles within the cost of the car.
Power outages have led to another need to adapt business activities, which has led to a slowdown in the pace of economic recovery. The most affected by this factor are public services, retail trade, and public catering. The effect of this factor in time lasted from mid-autumn 2022 to the end of winter 2023. This factor had little impact on insurers who had previously adapted their activities to remote work.
Abolition of relaxed regulation for insurance companies
Given the rapid pace of adaptation of insurers’ activities to work during the war and to increase the stability of the insurance market, the National Bank of Ukraine has begun to gradually tighten regulatory requirements in terms of transparency of insurers’ ownership structures and increasing their solvency. In addition, as part of the European integration processes, the Law of Ukraine “On Insurance” was updated in November 2021.
Changes in the number of insurance companies in Ukraine
"Ukrainian business and Ukrainians have demonstrated an impressive ability to adapt to challenging conditions. Most enterprises continue to operate during a large-scale war, albeit at lower capacities. Farmers have carried out another sowing campaign, power engineers are doing the impossible to maintain the stability of the energy system, the IT sector is working quite stably, and trade and the service sector have quickly adapted to work in conditions of constant shelling and air raids. The large-scale energy terror unleashed by Russia at the end of the year caused additional losses to the Ukrainian economy, however, could not stop it", this quote from the publication of the National Bank of Ukraine most successfully characterises the period of 2022 to 2023.
According to the last report date in July 2024, the number of insurance companies in Ukraine has now decreased to 90 from 155 at the end of 2021. Up-to-date information on the performance of insurers in Ukraine is here.