29 Feb 2024 21:55

Int'l insurers mulling risk insurance mechanism to reopen Ukrainian airspace for commercial aviation - expert

MOSCOW. Feb 29 (Interfax) - Creating a war risk insurance mechanism to resume commercial flights to and from Ukraine could be challenging, but specialist insurance companies are interested in implementing the project, Crispin Ellison, an Oliver Wyman partner says.

"You need about three-quarters of a billion dollars in capacity to insure even relatively infrequent flights. [...] The Ukraine government doesn't have a lot of funds. We can probably get the capacity, as there is real interest from specialist war risk insurers, we can probably build the capacity to cover that," Ukrainian media quoted Ellison as saying during a webinar on political risk insurance organized by the U.S.-Ukraine Business Council (USUBC) and the U.S. Department of Commerce.

Ukrainian President Vladimir Zelensky declared before Christmas the intention to start opening Ukraine's airspace, but that requires insurance coverage for commercial aircraft, Ellison said. The question is to get it at an affordable price, he said.

Among the challenges that have to be resolved to reduce risks, Ellison mentioned deploying appropriate air defense assets around airfields, protecting air corridors, and choosing the right airlines.

"There's a lot of work going on with the Ukraine government, we've been working closely with the Israeli government, who have decades of experience to build some protocols," Ellison said.

According to materials prepared by Marsh McLennan and presented by Ellison, the reopening of the Ukrainian aviation sector for passenger and cargo could increase Ukraine's GDP by 5%-8%. The goal of the project in question is to cover war risks for planes, passengers, cargo, and aviation infrastructure on agreed routes to designated airports. The materials consider the Lvov and Kiev Boryspil as such airports and describe the Ukrainian leadership's political plans to open at least one airport in the first half of 2024 as ambitious.

The materials also analyze ways to reduce insurers' risks through public-and-private partnerships similar to the Unity Facility war risk insurance mechanism applied in the shipping corridor unilaterally established by Kiev in the Black Sea, which would require a compensation fund of $300 million to $500 million provided by the government or by donors.

As reported earlier, Ukraine set such a $20-million compensation fund for the Unity Facility mechanism, which provides up to $50 million in hull and separate protection and indemnity war risk insurance.