As Ukraine enters the third year of the full-scale invasion, it is struggling to find solutions to support its economy during wartime. As outlined in previous editions, the Ministry of Economy is pursuing anticipated legislative initiatives expected to attract vital investments by securing them with insurance products by market standards. In 2024, the National Bank of Ukraine (NBU) presented a draft law on a war risk insurance system for discussion with the business community. This draft law has since been registered with Parliament and is currently being considered by lawmakers.
The draft presents the overall framework and essential provisions. According to it, the newly established State Agency for War Risk Insurance (the “Agency”) will provide war risk insurance and reinsurance, as well as coordinate the war risk insurance system and its future development steps. A key element of the Agency’s operation is war risk insurance, aimed at protecting investment assets from hostile actions, covering (i) damages from military actions and drone or missile attacks, (ii) profit or property loss due to occupation, and (iii) injuries or fatalities of personnel near the frontline. The Agency will play a central role in establishing and updating standardised insurance products and outlining their material terms. The standardised policy aims to cover essential provisions that establish mandatory market standards in alignment with international benchmarks outlined by the regulator. Such products will include (x) general underwriting terms, (y) a method for calculating premiums, and (z) guidelines or materials for executing contracts and settling claims. The regulator aims for the system to come into full force in late 2025.
Lawmakers are also working to enhance the factoring market. The newly submitted draft law to Parliament aims to harmonise the Law “On Factoring” with European legislation. This essential instrument is necessary for businesses to secure additional funding to ensure the seamless continuity of their operations. Currently, non-bank factoring often involves the assignment of monetary claims on non-performing loans. Legislators intend to separate these two instruments by designating trade factoring as a distinct category. One of the new features will be the introduction of a mechanism to register the assignment of a factor’s claim in a public register, as well as providing a broader specification of the rights and obligations of the parties under such agreements.
Another forthcoming development in the finance market is the long-awaited legalisation of cryptocurrency assets, anticipated to occur in the first half of 2025. Nearly three years ago, the Law “On Virtual Assets” was enacted, defining their legal status, registration procedures, and compliance rules for issuers. However, it will only enter into legal force once taxation issues are introduced. This matter remains uncertain; however, it is unlikely we will see any exemptions or breaks due to the necessity of bolstering the state budget.
These initiatives undoubtedly represent a vital move towards enhancing Ukraine’s economic stability and drawing in crucial investments for future development.
Material prepared by Olexiy Soshenko, Managing Partner, and Artem Mykhailyk, Junior Associate, for the 7th edition of LIR Ukraine (page 34).