Kniazha VIG Secures DFC-Backed War-Risk Insurance Facility With Aon Support

Kniazha Vienna Insurance Group (KNIAZHA VIG), one of the Ukrainian subsidiaries of Vienna Insurance Group (VIG), has finalized a reinsurance facility agreement with the US International Development Finance Corporation (DFC) to deliver war-risk insurance solutions to small and medium-sized businesses and private individuals across Ukraine.

War-risk insurance has been one of the most requested financial instruments for Ukrainian businesses since 2022. However, the market remains underdeveloped, with only a limited number of players offering products in this segment, while government-led initiatives have so far delivered modest results.

The agreement, concluded in collaboration with global professional services firm Aon, came into force on Feb. 1, and provides a $25 million reinsurance facility that will support a portfolio of war-risk insurance policies totaling up to $100 million, according to the company’s announcement.

Efforts to create a massive nationwide war risk insurance stalled

Despite efforts by the National Bank of Ukraine to develop a market-based solution together with international partners, coverage remains fragmented. G7 countries have yet to deploy any large-scale national war-risk insurance solution despite earlier statements signaling such intentions.

The Ukrainian government has also sought to address the gap institutionally. A draft Law of Ukraine “On the System of Military Risk Insurance,” which envisages the creation of a state-backed war insurance agency, was presented to the business community in 2024 and formally submitted to Ukraine’s parliament,  the Verkhovna Rada, on Dec. 30, 2024.

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Existing war-risk insurance initiatives: EBRD, DFC

At the Ukraine Recovery Conference in Berlin in 2024, the US International Development Finance Corporation announced a financing package for Ukraine that included more than $350 million in political risk insurance. 

The package comprised a $50 million reinsurance facility brokered by Aon and distributed by ARX: $150 million in coverage for the agricultural export sector, a $152 million policy for a Ukrainian manufacturing company, and $5 million to support Ukrainian students’ access to higher education.

In December 2024, the European Bank for Reconstruction and Development (EBRD) also launched a war-risk insurance initiative in partnership with Aon, backed by its €110 million ($110 million) Ukraine Recovery and Reconstruction Guarantee Facility. The mechanism is designed to expand reinsurance capacity for private insurers covering domestic cargo, motor vehicles and railway rolling stock.

Ukrainian insurers INGO, Colonnade and UNIQA joined the EBRD-backed facility as its first local participants. The EBRD has said the scheme could enable insurance coverage for up to €1 billion ($1.2 billion) worth of goods and vehicles in transit annually if the pilot proves effective.