In Kyiv, at the premises of the Ukrainian Chamber of Commerce and Industry with the support of CIPE, a round table discussion was held dedicated to the mechanisms for compensating damages and insuring business against war risks. Representatives of the government, business associations, the insurance market, and analytical centers joined the discussion. Over 170 participants followed the discussion online.

The main topic of the meeting was the initiative of the Ministry of Economy and Environment of Ukraine to create a special fund to compensate for enterprise losses caused by Russian attacks.

What the Government Proposes

According to the presented concept, the state should assume coverage of the first, most risky layer of damages—up to the equivalent of 10 million dollars per program participant. The fund is planned to be created within the special fund of the state budget and administered through the infrastructure of the Export-Credit Agency.

To replenish it, the Ministry of Economy proposes raising the standard VAT rate by one percentage point. Program participants are also required to pay a contribution of 2% of the asset value.

Ministry representatives explained that the Ukrainian insurance market is currently insufficiently capitalized to independently cover significant war risks. The cost of international reinsurance can be 8–12%, and for many sectors and territories, private insurance coverage remains inaccessible.

In the government’s view, state coverage of the first layer of damages can increase the readiness of insurance and reinsurance companies to join the program and offer additional coverage above the limit established by the state. The Ministry of Economy views the VAT increase as a quick and predictable mechanism for replenishing the fund, which is also understandable for international partners.

How Business Reacted

Representatives of the business community agreed with the urgency of the problem of war damage compensation, but expressed reservations regarding the proposed funding source and risk distribution model.

According to a survey by the Union of Ukrainian Entrepreneurs, 84.6% of companies that took part in it do not support raising the VAT rate. Representatives of the Taxpayers Association of Ukraine and the European Business Association also spoke out against financing the program through a VAT increase.

Among the main reservations are the potential shift of additional financial burden onto consumers and conscientious business, as well as the unevenness of such a burden due to the significant share of the shadow economy.

As alternative funding sources, participants suggested considering the reduction of inefficient budget expenditures, a review of tax benefits, the expansion of luxury taxation, targeted tax instruments, and the possibility of reducing future tax liabilities of affected enterprises by the amount of documented damages.

What Alternative Models Were Proposed

Representatives of the Alliance of Analytical Centers presented another model, in which primary coverage is provided by the insurance market, while the state assumes the last, catastrophic layer of damages and compensates for part of the insurance premium cost.

Insurance market representatives also expressed reservations regarding state coverage of the first loss and the application of a uniform 2% contribution for all participants. In their opinion, a flat rate without taking into account the region, asset characteristics, and risk level could lead to the program being mainly used by enterprises with the highest probability of property damage.

As an alternative, insurers proposed a model of partial reinsurance with the participation of the state and the ECA, partial subsidization of insurance payments, and the differentiation of conditions depending on the risk level and geographical location of the enterprise.

At the same time, Ruslan Hashev, Chairman of the Board of the ECA, drew attention to the experience of insuring the grain corridor. According to him, government coverage of the first layer of damages made it possible to lower British insurers’ rates from 4% to 0.75%. At the same time, transforming the ECA into a classical property reinsurer, in his assessment, does not correspond to the institution’s mandate and OECD rules.

Dialogue Continues

Following the round table, a coordinated decision on funding sources, risk distribution, and the final design of the program has not yet been found.

Participants proposed creating a joint working group, conducting an in-depth survey of business regarding its needs and readiness to participate in the program, publishing the financial and economic calculations of the Ministry of Economy, and separately comparing the proposed models.

The dialogue between the authorities, business, insurers, and the expert community is ongoing. The main thing remains obvious: the creation of an accessible mechanism for war damage compensation and war risk insurance is impossible without a partnership between the state and business.

The task of the parties is to jointly find a transparent, financially secured, and balanced model that enterprises can trust and actually use.