Ukraine’s resilience poses questions for insurers for when the war ends

The annual gathering of reinsurers in Monte Carlo for 2024’s Rendez-Vous de Septembre conference, held between 7 and 11 September 2024, had barely started when brokers Aon and Marsh issued a joint call for greater industry-wide help for Ukraine, to support its resilience efforts.

The pair said that the removal of blanket exclusions would catalyse Ukraine’s growth and future reconstruction.

The firms added that the (re)insurance sector had to build upon its capital, expertise and the historical role it has traditionally performed to help Ukraine’s resilience and strengthen the country’s foundations for a post-conflict economy.

Greg Case, chief executive at Aon, said: “Aon’s support of Ukraine leads us to look forward to its economic recovery.

“Insurance capital is essential for the reconstruction of Ukraine’s healthcare, energy and agricultural sectors. We’re asking the insurance industry to look closely at Ukraine’s risks and work to strengthen the public-private partnerships under development.”

Hefty rebuilding price tag

However, as Russia’s war with Ukraine wages on – the conflict began in February 2022 – the rising cost of conflict-related damage is set to have repercussions for (re)insurers far beyond the two countries’ borders.

The cost of rebuilding Ukraine when the war ends will run into hundreds of billions of pounds.

And, while the ongoing calls for global military support have come at a cost for other nations, it is extremely likely that once the fighting has stopped, the Ukrainian government will issue a worldwide call for support in financing rebuilding costs.

Work continues globally around how those hundreds of billions will be raised at a time when there is growing protectionism in many countries due to economic downturns post-Covid-19.

In the UK, rumors still abound around work the previous Conservative government was undertaking to support Ukraine here. This included potentially channelling the assets seized from Russian interests in the UK to put towards rebuilding costs.

Unintended consequences

Without doubt, aside from discussions around funding for rebuilding, there will also be a call for the world’s building materials to be sent to Ukraine, which will increase the costs and availability of materials used in repairs and construction elsewhere.

Post-pandemic, the raw materials shortage experienced by UK insurers and policyholders is likely to be exacerbated by any future Ukrainian reconstruction.

Quite frankly, it is difficult to argue that the wood needed to repair a storm damaged shed is more pressing than using the timber to rebuild the homes destroyed by Russian ordinance.

The same can be said for access to labour. The rebuilding of Ukraine will be a massive task and will provide many years of employment to huge numbers of skilled tradespeople – this will be a significant attraction to workers from across the world.

As such, it will likely drive the cost of workers in the UK as supply struggles to meet demand.

The plight of those in Ukraine continues to concern the world, but as risk-based businesses, insurers need to be planning for how they will manage the flip side of efforts to drive resilience and reconstruction.