A leading Ukrainian risk manager has told Commercial Risk Europe about some of the biggest challenges facing his profession as the Russian invasion continues. He said the banking system remains intact and insurance is helping to keep the country going but the uncertainty brought about by war is a major problem for business.
Mykhailo Rushkovskyi, who headed the risk functions in Ukraine at Naftogaz, the largest state-owned oil and gas group, worked for DTEK Group and is the founder of RUNDERC.com, said: “The key risk for us is uncertainty around the war and its timeframes. We do not know what will happen next.”
Rushkovskyi, who is based in Kiev, said GDP is expected to drop by 35% in Ukraine this year and risk managers fear a big a recession.
“We worry about oil products and gas supplies. For the renewable companies there should be an opportunity, but most of the wind turbines are in the south of the country. That area is now partly occupied by the Russians and the turbines are controlled by third parties. We don’t know what state they are in. The situation is still unfolding,” said Rushkovskyi.
The better news is that the Ukrainian banking system is largely uninterrupted and allowing the country’s businesses to continue operating, he explained.
“IT businesses are also continuing. Because of Covid-19 we had become more flexible, so we have people working for Ukrainian businesses but living in another European country. They are still paying Ukrainian tax, so government still has an income, which in turn means it can pay its employees,” he added.
Rushkovskyi said insurance is also playing a critical role in keeping the country going. “At DTEK we had bought war cover for the turbines, for example, aiming to have comprehensive cover for the plant,” he said.
He likens this to the Wimbledon tennis tournament buying pandemic cover for years before Covid-19 hit. “They bought pandemic cover for years before it was needed but all those premium payments were well worth it as soon as the pandemic hit. We feel the same. We had been buying cover for all eventualities and it is now paying off,” said the risk manager.
“The government is also asking us to document all buildings and plant damaged by the Russians, so that we will be able to make a claim against Russia for the cost of rebuilding the country,” he explained.
Rushkovskyi is a huge advocate of the power of insurance, not just in enabling businesses to function but also to force change.
“As part of the sixth package of sanctions, EU officials are considering a ban on insurance for ships carrying Russian crude oil. Thus, an embargo on Russian crude oil would cut Russia off from the EU market and a ban on insurance would make it very difficult to export crude oil to Asia and other countries,” he said.
Adding: “This insurance approach was already used effectively ten years ago to restrict Iranian crude oil exports as part of the conflict over Iran’s nuclear programme. In this way, insurance can become one of the effective tools of the EU sanctions on Russia to reduce financial flows for the continuation of the war.”
But Rushkovskyi believes both risk management and the insurance market need to evolve. “We need risk management 2.0 and insurance 2.0 in the future. We cannot do things in the same way if we are to manage our way through systemic shocks, such as climate change and through cyberattacks,” he said.
- To hear more from Mykhailo Rushkovskyi, register for Commercial Risk’s Global Programmes conference on 15-16 June, when he will be taking part in a Q&A. Click here to register https://www.commercialriskonline.com/events/global-programmes-2022