McGill’s Ukrainian war risk facility attracting ‘broad’ interest

McGill and Partners’ new war risk facility for commercial property in Ukraine is attracting broad interest, including from some foreign assets, with renewal energy, large manufacturing and retail firms particularly keen on cover, the broker said. But it stressed that all risks are being assessed on their own merits. The “first of its kind” war risk reinsurance facility was launched in January to help deliver cover in an extremely challenging environment. The innovative project links London market reinsurers with local Ukrainian insurance capacity, initially through ARX, part of international group Fairfax Financial Holdings. The facility uses AI analytics that combine three years of Ukrainian air defence data with AI-based analytics from Lloyd’s Lab Ukrainian Insurtech startupFortuneGuard. Hamish Greenwood, head of crisis management at McGill and Partners, recently told The Political Risk Podcast, that a “broad range of assets” are coming in for cover from the facility. There is high demand for energy assets, particularly renewables that are seen as less risky compared to traditional power assets under attack. Manufacturing sectors, including wood, bottling and building materials, are also inquiring about coverage. Retailers in Kyiv are seeking protection, but costs are high given the risk. “We’ve specifically kept the appetite broad. We want to assess every risk on its own merits,” said Greenwood. “But some kinds of themes have come through. We’ve seen fair amounts of energy assets. I think it’s safe to say that the more traditional power assets are out of scope. They’re under attack so much at the moment, it doesn’t make them insurable. But there’s a lot of renewables in Ukraine, so we see a lot of solar plants and wind assets as well that are in potentially less risky areas.” “Potentially we have foreign investments as well. Cover for large manufacturing is another area where we’ve seen inquiries come in… And then we do also see a fair amount of retail exposure, and that tends to be in Kyiv, which is challenging and expensive. We are offering terms, it’s just the price tends to be a bit prohibitive at the moment in central Kyiv,” added Greenwood. The facility allows up to $50m in coverage per risk for properties more than 100km from the front line. McGill said cover for commercial assets since the outbreak of war with Russia narrowed to local insurers, including ARX, with policy limits of $500,000 that were extremely expensive. The goal is to make insurance more affordable for Ukrainian businesses by addressing the catastrophic exposure and improving the submission process. The strategy includes providing good risk analytics to help underwriters better understand and assess the risks involved. The ultimate goal is to bring the cost of insurance to a level that Ukrainian businesses can afford, ensuring they have access to coverage at a reasonable price. “Previously, we were looking at individual accounts that were coming in and wanting to buy one-off coverages on our standard set wordings, and you’d see the $100m limits, and people were wanting ten million of premium. So that gives you an idea of how expensive it was. And unfortunately, that just meant any Ukrainian business was totally priced out of buying the cover, and the capacity was very small as well. So that drove price. What we’ve done here is take away the catastrophic exposure a little bit to underwriters. We’ve packaged up how we submit everything and provide a good risk analytics, and the whole goal of that is to bring it to an affordability level that Ukrainian businesses can afford,” explained Greenwood. The policy mitigates the risk of catastrophic loss for insurers by withdrawing coverage when the front line is within 100km of an insured assets. The policy is refunded on a pro rata basis if the threshold is breached. “That catastrophic loss scenario can only really occur if cities or towns come within artillery range, which is generally seen to be around the 60-km mark… so what is built into the policy is that if the line of contact moves within 100km of an insured asset then underwriters come off risk and the policy is refunded on a pro rata basis. It’s just not a risk that the underwriters are willing to cover at the moment… so that’s why that provision has to be in there,” said Greenwood. The decision to set the 100-km limit and proof that the west of Ukraine is less risky than the east is backed by data from the Ukrainian government. This played a big part in making cover available through the facility and convincing insurers to share the risk. “While that theory of the west being much less risky than the east was an obvious one, we needed data to back that up, and that’s where some of the work done by the Ukrainian government very early on in the war has really started to pay dividends. They kept a huge database of projectiles coming over and where these impacts had occurred in Ukraine, and it allows you to paint a really clear picture and categorise the regions in terms of how badly affected they’ve been,” said Greenwood. “And this allowed us to put a proposition in front of underwriters that was data driven and showed there are territories in Ukraine that are largely unimpacted by this war and, as a result, there are insurable assets in there and businesses that need this protection against the uncertainty of these drones coming across and missiles landing,” he added.

McGill’s Ukrainian war risk facility attracting ‘broad’ interest

Air defence risk data and 100km front line limit secured carrier buy-in

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