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Security guarantees vital for rebuilding of Ukraine

It seems there's no end in sight for the Russian invasion of Ukraine, at least not in the foreseeable future. Nonetheless, rebuilding efforts cannot be delayed because, in the face of Russian air attacks on critical infrastructure such as power plants and power supply lines, more and more of the country is at risk of becoming uninhabitable.

Every day that the Russian army continues its assault on Ukraine, another pocket of the country is destroyed. Estimates of the cost of this destruction range from 350 to over 1,000 billion dollars – a figure that only includes the damage inflicted in the country to date. Ukraine is a country at war and in crisis. It needs help if it is to stand any chance of rebuilding. The EU Commission wants to take a lead role in this. Svenja Schulze, the German Federal Minister for Economic Cooperation and Development, has already promised 426 million euros in aid. In addition to helping finance the rebuilding of Ukraine, the German economy is also weighing up the future opportunities and risks presented by this rebuilding. Foreign investments in Ukraine require insurance – not just for the actual financing, but also for the material assets and operations on the ground as well as the supply of goods. In addition, the Ukrainian import market needs propping up with supplier credit agreements, which themselves routinely need to be insured against the risks of default. Despite the additional aid promised, rating agency Moody's has downgraded Ukraine's already poor credit rating even further, from Caa2 to Caa3 with a negative outlook. That means the country's rating risks being downgraded again in future. If this were to happen (or even before then), the insurance industry must ask itself to what extent it is willing to support the rebuilding of Ukraine. As material assets and sales volumes increase, the workforce changes and political risks emerge, the scope for risk-transfer solutions is set to be enormous. It is therefore essential to define now what the key parameters for any future insurance solutions will look like. Fundamentally, any future investments in Ukraine must be in line with the EU's own standards as well as its policies on climate, the environment and digital strategy. Only then can the German economy – with the support of the insurance industry – grasp this historic opportunity to help shape a green and digital transformation in Ukraine and, in turn, across the whole of Europe.

Ulrich Wepler

Strategic Account Manager