Ukraine plans $2–3 billion war-risk insurance fund for businesses, partly funded by VAT hike
Ukraine's Minister of Economy Oleksandr Kravchenko announced plans for a $2–3 billion insurance fund to compensate businesses for losses from Russian attacks, with payouts targeted to begin on January 1, 2027. The government proposes funding part of the fund by raising VAT from 20% to 21%, a politically sensitive move that has not yet been finalized.
Key points
- Minister of Economy Oleksandr Kravchenko announced the plan at a meeting with journalists.
- The fund would compensate up to $10 million per group of companies for a 'first loss' caused by a Russian attack.
- The insurance premium for businesses would be 2% of the insured asset value within the compensation limit.
- Total planned fund capital: $2–3 billion, with the government seeking donor co-financing of at least 50%.
- Proposed funding: a 1-percentage-point VAT increase from 20% to 21%; alternatives include a temporary or doubled import duty.
- Insurance payouts are planned to start January 1, 2027, if funding sources are secured.
- Kravchenko estimated business losses from Russian attacks could reach about $10 billion, though sources differ on whether this figure refers to 2025, 2026 or is unspecified.
Why it matters
The proposal would create a major new mechanism for helping Ukrainian businesses, especially large ones not covered by existing damage-compensation and preferential-lending programs, to recover from Russian attacks. It would also require a politically sensitive VAT increase that directly affects consumers and businesses, tying domestic tax policy to the search for external donor support. With payouts not expected before January 1, 2027, businesses would still bear war-risk losses in the interim.
What happened
Economy Minister Oleksandr Kravchenko told journalists that the government plans to create a $2–3 billion war-risk insurance fund for businesses affected by Russian attacks. Under the proposed scheme, the state would cover up to $10 million in 'first-loss' damages per company group, with participating businesses paying a premium of 2% of the insured asset value within the compensation limit. Private insurance companies would also be involved. The government sees the fund as filling a gap left by existing programs such as damage compensation and the 5-7-9 preferential lending program, which mainly serve small and medium businesses. To fill the fund, the Ministry of Economy proposes raising VAT by 1 point, from 20% to 21%, and is also considering a temporary import duty or roughly doubling existing import duties. Kravchenko said the government expects international donors to co-finance at least 50% of the program. Without state support and higher taxes, he warned, the insurance premium for businesses would have to rise above 20% of asset value, making coverage unaffordable. Insurance payouts are planned to begin on January 1, 2027, if funding sources are secured by then. Kravchenko estimated business losses from Russian attacks could reach about $10 billion, though the year is not consistently specified across reporting. The final decision on the tax changes has not yet been made.
How Ukrainian sources describe it
All of the sources covering the announcement are Ukrainian, and they uniformly present the insurance fund as a government response to the scale of business losses from Russian attacks. The coverage emphasizes the funding mechanism — the proposed VAT increase from 20% to 21% — and the political sensitivity around a tax hike that would affect consumers, with several headlines foregrounding this dimension. Ukrainian outlets also frame the new fund against the limits of existing programs, noting that the 5-7-9 lending scheme and damage compensation mainly serve small and medium businesses and leave large enterprises exposed. The reporting places the tax discussion in a broader fiscal-pressure context, citing the defense budget deficit, the September 1 failure of the Verkhovna Rada to pass VAT-on-parcels bills tied to IMF and EU tranches, and the government's call for a strict economy regime in non-defense spending.
Where reporting differs
Sources do not agree on the year for the $10 billion business-loss estimate from Russian attacks cited by Minister Kravchenko: some specify 2025, others 2026, and at least one does not specify the year at all.
Background
Existing state support — damage compensation and the 5-7-9 preferential lending program — is designed primarily around small and medium businesses and does not adequately cover large enterprises. According to Kravchenko, Russian attacks and the de facto blockade of Ukrainian ports have already cost the economy about 1.5% of GDP and put roughly $40 billion in export revenue at risk. Prime Minister Serhiy Koretskyi said the government is moving to a strict economy regime for non-defense budget funds, while Defense Minister Yevheniy Khmara cited a $27 billion defense budget deficit at the September 8 Ramstein meeting. On September 1, the Verkhovna Rada, Ukraine's parliament, failed to pass two bills required to levy VAT on international parcels valued at up to €150; their adoption is a condition for a third IMF program tranche of $0.7 billion and a second EU macro-financial assistance tranche of €3.7 billion under the €90 billion Ukraine Support Loan. A new war-risk property insurance mechanism, the ECA, has been in operation since January 1, and the EBRD's Enterprise Security Enhancement program allows partial loan write-offs for businesses with damaged property.