Ukraine Prepares a Multi-Billion-Dollar Insurance Fund to Save Businesses from the Aftermath of Shelling

In 2026, the cumulative losses of Ukrainian businesses caused by systematic missile and drone attacks by Russia could reach the mark of 10 billion dollars. This was stated by Ukraine's Minister of Economy and Environment, Alexander Kravchenko, in an interview published by RBC-Ukraine. According to him, the scale of the losses is unprecedented for the domestic economy under conditions of an ongoing war. The government recognizes that the existing support instruments — loss compensation programs, preferential lending, and the "5-7-9" mechanism — are unable to cover the needs of the entire entrepreneurial sector. In fact, these programs work predominantly for small and medium-sized businesses, while large and mid-sized enterprises remain largely without systematic protection.

Two Systemic Problems of the Insurance Market

Kravchenko highlighted two key systemic limitations the government has faced. The first is that the cost of insurance is critically high for businesses. The second is that the volume of available reinsurance is extremely limited and has, in essence, run dry. The Ukrainian insurance market is currently underpinned mainly by reinsurance abroad, in particular through Lloyd's in the United Kingdom. However, reinsurers' portfolios are limited, highly risky, and not diversified. Combined with the state's fiscal constraints, this creates a situation in which neither the market nor the budget alone can provide adequate coverage of war risks for all businesses.

The "First Loss" Mechanism: How the Insurance Fund Will Work

One of the key solutions being worked out by the Cabinet of Ministers is the creation of a state insurance fund that covers the so-called "first loss," i.e. the initial risk. The model provides for an insurance compensation of up to 10 million dollars per enterprise. The logic of the mechanism is simple: the state cannot compensate 100% of the losses to every affected enterprise, but it can create a system that guarantees businesses a starting capital for rapid recovery. According to Kravchenko, such funds will allow critical equipment to be restored quickly, jobs to be preserved, contracts to be kept, and operations to resume as soon as possible. The cost of such insurance will be 2% of the coverage amount within the established limit. Since the state will assume the first risk, the final cost of the policy for businesses will be significantly lower than the market rate, ensuring much broader coverage. By design, the insurance market will be able to step in and reinsure all other risks beyond the state limit.

Funding: From Starting Capital to a VAT Increase

The compensation fund will be funded from several sources. At the start, according to the minister's estimate, capital of 2–3 billion dollars is required — a sum that Ukraine will have to provide from its own budget. International donors should then join the financing. Among the options for funding the fund, one of the most realistic currently under consideration is an increase in the VAT rate. Kravchenko explained the choice by noting that, in terms of the scale of the resource, administration, and speed of mobilizing funds, this instrument allows the minimum necessary funds to be raised quickly so that Ukrainian businesses can withstand intense shelling during the winter period. According to him, discussions with international partners take time, and the more serious the position of the Ukrainian side and its readiness to co-finance, the higher the chances of attracting substantial funds from partners.

Timeline and Launch Conditions

In terms of the timeline, the government aims to launch the mechanism in 2027, provided that sources of financing can be found. Kravchenko emphasized the need to significantly strengthen corporate governance and the transparency of the fund's resource use. In his assessment, all sectors must find a compromise to save the economy under current conditions. The minister acknowledged that the path will be difficult, but insisted: a step forward must be taken now, since discussions with international partners require time, and every month of delay increases the cumulative losses of businesses.

Contradictory Data

In Kravchenko's main statements conveyed to RBC-Ukraine, the fund's starting capital is estimated at 2–3 billion dollars. However, a number of specialized publications, in particular Inventure, use the figure of 3–4 billion dollars in headlines and analytical materials, describing the total volume of the "first loss" fund. The difference in figures may be due to the fact that in the first case the reference is exclusively to the initial state contribution, while in the second it is to the cumulative target volume of the fund taking into account donor co-financing. The exact parameters and final size of the fund were not fixed in a legislative act at the time the statement was published, as the mechanism is at the stage of development and coordination with the Ministry of Finance, international financial organizations, and the relevant committees of the Verkhovna Rada.