War Risks Insurance in Ukraine: What Businesses Need to Know

Dmytro Hruba, Attorney

Source: Interfax-Ukraine

War risks have always been a key exclusion in any standard insurance contract that we have known before. Full-scale war has made war risks a key challenge for businesses in Ukraine.

While citizens’ residential property is effectively insured by the state through the ‘eRecovery’ programme, destroyed warehouses, damaged production facilities or destroyed inventories, leading to, if not a complete shutdown of business, then significant and painful losses, are no longer theoretical threats, but a daily reality.

Conventional insurance policies do not cover such cases, since ‘war’ is by default an exception.

That is why companies operating or planning to operate in Ukraine need to understand what protection mechanisms are already available, where the war insurance market in Ukraine is heading, and whether it exists at all.

What War Risks for Business Can Currently be Insured?

Property risks associated with war can be divided into two main categories:

• direct losses: destruction or damage to real estate (offices, production facilities, warehouses, etc.), transport, equipment, goods in circulation, etc.;
• indirect losses: cessation of activities, failure to comply with contract terms, loss of customers, etc., resulting from the destruction of production facilities or similar events.

Not so long ago, insurance companies began to actively offer war risks insurance. Currently, they offer coverage only for direct losses related to war. Moreover, the list of insurance risks that insurance companies are currently willing to insure is very limited. Insurance companies are willing to insure the risks of loss (destruction) or damage to insured property exclusively as a result of the direct and/or indirect impact of missiles, unmanned aerial vehicles, air defence and anti-missile defence systems and/or debris from the aforementioned means of warfare.

At the same time, insurance companies are not willing to insure against losses caused by such common weapons as rocket artillery (not to mention barrel artillery), guided aerial bombs etc.

Insurance companies are also unwilling to provide insurance coverage for territories within 100 km of the nearest point of military (combat) operations. The distance is usually calculated by air, which differs significantly from the distance by land and potentially limits the locations for insurance.

At the same time, such clauses in the first drafts offered by insurers can often be interpreted so broadly that not only Kharkiv but also Uzhhorod could potentially fall under such exclusions from insurance coverage. Therefore, it is necessary to be careful in interpreting the various terms and conditions of an insurance contract and to carefully consider and analyse the proposed insurance terms.

What Coverage Mechanisms Already Exist?

Currently, there are two types of war risks insurance in Ukraine:

• local insurance provided by Ukrainian insurance companies with coverage of approximately up to UAH 20 million;
• insurance with the participation of foreign entities (foreign brokers, reinsurers, EBRD, etc.) with coverage of over UAH 20 million.

It should also be noted that the insurance rate for ‘war insurance contracts’ is quite high. For the local market with coverage of 10-20 million, the insurance price will be approximately 10-12% per year of insurance in Kyiv, and in the case of insurance for large amounts involving reinsurance mechanism – approximately 7-9%.

At the same time, the insurance rate depends on the location. For example, Kyiv, as already mentioned, is classified as the highest risk category among those eligible for insurance, therefore the insurance rate here will be higher than in other locations. It is also important that potential locations for insurance are periodically reviewed by insurers. Property in Kyiv was temporarily excluded from insurance coverage in early summer 2025, when the intensity of drone attacks on the capital increased.

The state also promises to help with war risks insurance. Recently, the Cabinet of Ministers of Ukraine announced the possibility of insuring war risks under a new state programme, which provides for two mechanisms:

• for frontline territories, under which the state plans to pay compensation for damage to destroyed business property through the Export-Credit Agency (ECA), which will require the payment of a property insurance fee (‘equivalent to an insurance premium’);
• for other regions, under which the state plans to compensate part of the insurance premium that businesses pay to insurers.

It was also proposed to regulate the issue of war risks insurance at the legislative level. However, given that draft law No. 12372 has not made any progress over the past year, this idea has obviously been abandoned.

We will find out later whether the programme announced by the government will work in practice and whether it will bring significant results in the field of war risks insurance, as the launch of the programme was planned for October this year.

Key Challenges for Businesses and Ways to Address Them

The main challenges and risks in war risks insurance include the following:

• a significantly limited list of risks that insurance companies are willing to insure;
• the high cost of insurance, which makes it unaffordable to a wide range of market players;
• legally complex war risks insurance contracts, the lack of established practice in their performance, and the lack of case law create legal uncertainty in this area;
• the risk of termination of insurance coverage, in particular, in the event of hostilities within a certain distance specified in the insurance contract, etc.

While the first two problems are driven by objective conditions, and I would not expect a significant reduction in insurance prices or an expansion of the list of insured risks in the near future, the latter two issues can certainly be addressed.

First of all, it is necessary to thoroughly assess the risks of the business and determine what exactly needs to be covered (real estate, inventory, etc.).

Secondly, it is necessary to carefully review the proposed draft insurance contract, literally to every comma, and not be afraid to propose substantial amendments to it, justifying their necessity. Particular attention should be paid to the list of insurance risks and exclusions. For example, the contract may state that damage caused by unmanned aerial vehicles is covered, but their debris may be ‘forgotten,’ which will create the grounds for further uncertainty and dispute.

I would also advise paying special attention to the rights and obligations of the parties, the actions of the insured in the event of an insured event, the list of documents required to receive insurance compensation, the procedure for calculating losses, etc. It is necessary to change or exclude all unfair and potentially unfulfillable obligations without hesitation.

In the event of an insured event, there must be a real possibility of timely and clear fulfilment of certain conditions of the insurance contract, because, after all, the possibility of receiving insurance compensation depends on this.

Therefore, be prepared for negotiations. A war insurance policy is always an individual product, and it is usually possible to reach an agreement on all unfavourable and controversial terms, although not necessarily on the first attempt.

Ilyashev & Partners Law Firm recently dealt with such lengthy and thorough negotiations when insuring a client’s property for more than UAH 800 million, involving both a Ukrainian insurance company and a foreign reinsurer. We managed to draw up an insurance contract that meets the client’s interests and eliminates the possibility of double interpretation of certain provisions of the contract, making it clear and transparent in the context of the actions of both parties in the event of an insured event.

Conclusion

War risks insurance in Ukraine is still in its formation stage, but it is already becoming an important tool for businesses operating and investing in wartime conditions. In the near future, the market will continue to develop through the joint efforts of the state, business, international partners and private insurers. For companies that think strategically, this means that war risks insurance is no longer an exceptional option but is becoming part of the basic risk management package.

Those who decide to insure themselves against this category of risks should carefully review the contract offered by the insurance company and be patient for lengthy negotiations in order to have insurance not only on paper and to receive proper insurance compensation in the event of an insured event.