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Ukraine’s export credit agency (ECA) was a little-used state institution when Russia launched its full-scale invasion of the country, having closed deals worth less than US$5mn at the time.

But the ECA has since become an increasingly vital resource for Ukrainian exporters in need of insurance, reinsurance and guarantees.

In 2023, it signed deals totalling Hrn7.84bn (US$190mn), with coverage expanding significantly – from 16% to 45% of Ukrainian exports – according to law firm Dentons, “reflecting the agency’s expanding influence”.

Now, Kyiv is looking to leverage the agency in aid of a new cause: boosting war insurance in the domestic market.

In January 2024, the Ukrainian Parliament signed a law authorising the ECA to insure investments and investment loans against war and political risks, and in recent months, it has started receiving applications.

According to World Bank estimates, Ukraine’s rebuild will cost upwards of US$480bn over the next decade, requiring both public and private capital to reconstruct roads, bridges, homes, factories and energy infrastructure.

While foreign ECAs have collectively pledged hundreds of millions of dollars, and multilateral insurers such as the Multilateral Investment Guarantee Agency are actively involved in Ukraine, commercial insurers have remained wary of entering the market.

GTR speaks with Ruslan Hashev, chairman of the management board of Ukraine’s ECA, about the scheme’s progress, ongoing challenges for the agency, and plans to potentially onboard a new shareholder.

 

GTR: To what extent has Ukraine’s export credit agency grown its activity in recent years, and through which types of products?

Hashev: Insurance of pre-export finance loans comprises the bulk, about 98% of our portfolio. The Ukrainian Parliament made significant changes to the law, allowing us to restart our activity. Before these changes, from 2018 to the end of 2021, we supported exports worth about Hrn100mn, which was a very low amount.

In the first year of the war, we signed deals worth Hrn3.2bn and last year we recorded volumes of Hrn7.8bn. This figure is already Hrn5.5bn in 2024, and we believe we’ll surpass last year’s results.

Poland is our leading market of coverage, with the agency insuring exports worth over Hrn3.5bn in the past two years.

During the same period, the ECA has also covered exports worth Hrn2.9bn to Austria, approximately Hrn1.2bn to Lithuania, Germany about Hrn950mn, and the UAE, Hrn850mn.

The ECA has backed exports of various types of goods, such as furniture, electrical machinery equipment, as well as wood products.

 

GTR: Earlier this year, Ukraine’s ECA launched an investment insurance product. How is this scheme developing, and which types of companies is the agency looking to support?

Hashev: The scheme is open to investors – both Ukrainian and foreign – seeking to develop export-focused projects in Ukraine, as well as financial institutions if they are providing an investment loan.

The ECA can supply up to 100% cover for war and political risks, and policies have a maximum period of five years.

The ability to cover war and political risks is very important. Private investment will be needed for Ukraine’s post-war recovery, but also for reconstruction projects that must be implemented before the end of the war.

But the risks of investing in Ukraine are so high and there are no projects where the profitability exceeds the risks involved. Therefore, such insurance is needed to encourage private investment.

The ECA has so far received two applications for direct investment insurance – one from a Ukrainian company and another from a foreign firm.

On September 16, 2024, the ECA signed an investment credit insurance contract that was its first to cover war risks. The agency insured an investment loan of Hrn9mn issued by MTB Bank to Flexores, an exporter from the Lviv region that produces products for flexographic and rotogravure printing and is a leader in the sale of printing inks in Ukraine. The funds will be used to purchase a gas turbine generator to ensure the smooth operational cycle of the company.

 

GTR: Which types of projects does the ECA expect to support under the investment product?  

Hashev: Ukraine’s ECA will support investments in line with the needs of Ukrainian exporters.

In Ukraine there are issues with electricity, with energy. Our insurance could allow companies to buy electricity-generating equipment for their factories. Or maybe they can open a new plant with new equipment – whatever they want, so long as it is related to future exports.

At this stage, it does not matter the amount of goods they will deliver abroad, we are talking about export potential. A Ukrainian company simply has to tell the financing bank they want to produce goods for export and they can be eligible for cover.

However, we operate under certain restrictions. Under Ukrainian law, the agency is mandated to only insure value-added exports as opposed to raw materials.

We are also constrained by the size of our statutory capital. There is limited reinsurance capacity in the market currently and our capital is only Hrn2bn. Given the ECA’s current portfolio has an insurance liability of about Hrn700mn, this means that, in the current situation, we likely cannot provide investment insurance worth more than Hrn1bn as it will exhaust the ECA insuring capacity.

 

GTR: Is Ukraine willing to support projects in the east of the country, close to the battlefront?

Hashev: It does not matter where deals are. We can support business in the west of Ukraine, or in the east. People have a lot of problems with security in the east of the country, but this business has to be alive despite Russia’s invasion. Ukrainian banks operate in the regions, and so does our ECA. We have a lot of state programmes, as well as international and domestic grants, helping us operate here.

 

GTR: What are the ECA’s plans for the coming years, and how will it boost its activity further?  

Hashev: Earlier this year, Ukraine’s ECA devised a long-term strategy for the first time, outlining its plans up until 2029.

Ukraine’s government committed to the International Monetary Fund to approve such a document by December, but with assistance from the World Bank, we have completed this exercise significantly faster.

One core focus of the strategy is to develop new products for Ukrainian exporters, such as investment insurance.

Secondly, the ECA will work to build closer ties with international partners and grow its use of reinsurance.

Last but not least is the institutional development of our ECA. For instance, solving our capital problem, growing our use of digital solutions, and embedding environmental, social and governance considerations into our underwriting practices.

In terms of the last development point, we do not exclude the possibility of attracting a new shareholder to boost our statutory capital. There is already some interest from potential shareholders, but it is too early to talk about a particular deal.

Ukraine’s Ministry of Economy must be the main shareholder according to the ECA’s charter, but the agency is open to selling minority shares to one or multiple shareholders. Partners may be private or public institutions, such as foreign ECAs.