Ukraine's Ministry of Economy has announced the development of a new mechanism to compensate entrepreneurs for war-related damage. According to RBC-Ukraine, the ministry stated this in its official Telegram channel. The key element of the proposed system is to be a special fund worth between three and four billion dollars, which, as envisioned by its authors, will serve as the financial foundation for reimbursing business losses incurred as a result of hostilities.
The First Loss mechanism: the state covers the first layer of damage
Building on the proposed fund, the Ministry of Economy plans to introduce the so-called First Loss mechanism. Under this model, the state will compensate the first layer of war damage within a pre-established limit. As a result, an entrepreneur whose property has been damaged or destroyed will receive a guaranteed payment from the state without having to prove the loss through a private insurance company. Any risk exceeding this limit can be additionally insured by the business on the private insurance market, which, according to the ministry's assessment, will ease the burden on the state budget while providing entrepreneurs with a more comprehensive level of protection.
Expansion of the existing war-risk insurance program
The new initiative is not an isolated measure. Previously, the Cabinet of Ministers of Ukraine had already expanded the existing war-risk insurance program for businesses and simplified the procedure for obtaining compensation for damaged or destroyed property. In addition, the government is considering amendments to the mechanism for partial compensation of property value and insurance premiums against war risks. Thus, the creation of a $3–4 billion fund and the introduction of the First Loss model logically continue and deepen the reforms already launched in the area of protecting businesses from the consequences of the war.
Operational model and development partners
According to the Ministry of Economy, the financial and operational model of the new mechanism is being worked out jointly with partners, although the full list of co-authors of the project is not disclosed in the available text of the statement. This indicates that work on detailing the model — including the criteria for selecting affected enterprises, the size of limits by business category, and the procedure for interacting with private insurers — is at the stage of active refinement. The final parameters of the fund and the conditions for applying the First Loss mechanism will be approved after the consultations are completed.
What this means for entrepreneurs
For Ukrainian businesses, the new mechanism potentially means a shift from fragmented compensation to a systematic protection model. The guaranteed state "first layer" of payments lowers the barrier to entry into the reimbursement system: an entrepreneur will no longer have to immediately turn to a private insurer, whose war-risk policies are often expensive and do not cover the full range of risks. At the same time, the option to purchase additional private insurance beyond the state limit preserves flexibility and allows large companies to build more comprehensive protection. Experts note that the success of the model will depend on the transparency of selection criteria, the speed of payments, and the sustainability of the fund's financing amid ongoing hostilities.
