A NOTE ON THE STATE OF THE INSURANCE PICTURE IN UKRAINE

Analysis and Commentary: by Paul Gregory
Principal, independent insurance solutions, New York, NY
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Tue, June 29, 2010

NEW YORK -- A brief summary of the state of insurance placements by international insurance markets in Ukraine shows that Ukraine is fraught with financial difficulties and defaults which have considerably impacted the market.

The Political Risk Insurance (PRI) viability is an extremely difficult territory to even approach at the moment. The Lloyds Market's appetite, for one, is very limited due in no small part to the large number of losses incurred in 2009. .

DEFAULTS IN UKRAINE
In addition to the bank defaults, such as Nadra Bank, the steel sector was also badly hit by the liquidity crisis and the fall in commodity prices. This resulted in the likes of Donetsksteel and IUD (Industrial Union of Donbas) defaulting on their debt service obligations in respect of a number of Pre-Export Finance (PXF) transactions that were placed last year. The losses amounted to tens of millions of dollars during 2009 and continue this year.

Several insurance opportunities for Ukrainian fertilizer companies have caused a struggle just to generate more than minimal insurance market support. In short, any payment risks prove very difficult to place, unless one can provide suitable guarantees

POLITICAL RISK INSURANCE  - OPIC
In short the Political Risk Insurance (PRI) business in Ukraine would be close to impossible to place at this point in time. The sole opportunity in this category is the Overseas Private Insurance Corporation (OPIC) who are taking a relatively benign view, unlike the commercial market, because the United States government appears to have taken a political decision to back the government in Ukraine for a variety of reasons to basically reinforce the growth of business between the US and Ukraine.

When the requesting company in Ukraine for PRI insurance has exposures in various other locales the possibility of "bundling" the various risks has some possibility.

COVERING PHYSICAL ASSETS
On another insurance subject, there is an appetite though for covering physical assets especially through Lloyds and European insurers which is quite viable. There are also some major Continental insurers domiciled in Ukraine and accepting good business.

Ukraine is an emerging insurance buyers market for the better risk opportunities, and financially demonstrable companies. In due time positioning oneself in Ukraine as an insurance supplier will undoubtedly pay off in the future .

For additional information on this subject, data or otherwise please e-mail Paul Gregory.

CONTACT: Paul Gregory, PG@PaulGregoryInsurance.com; www.PaulGregoryInsurance.com

NOTE:  Paul Gregory is a member of the U.S.-Ukraine Business Council (USUBC), Wash, D.C., www.usubc.org.