Ukraine's PM ties planned 1% VAT hike to war-risk insurance fund for businesses
Ukraine's Prime Minister Serhii Koretskyi said the 1-percentage-point VAT increase in the draft 2027 state budget is needed to finance a war-risk insurance programme for businesses hit by Russian strikes. The government estimates an initial Ukrainian contribution of around USD 1 billion, with international partners expected to quadruple the fund to USD 5 billion.
Key points
- PM Serhii Koretskyi said the 1% VAT increase in the draft 2027 budget will fund a war-risk insurance programme for businesses.
- Ukraine's required initial contribution is estimated at around USD 1 billion.
- The government expects international partners to quadruple the fund to a total of USD 5 billion.
- The new mechanism aims to deliver payouts immediately after rescuers verify destruction, replacing slow private insurance.
- Classic war-risk insurance is described as non-functional due to high costs and long waits for payouts.
- A USD 5 billion fund would let insurers offer affordable policies without needing to reinsure abroad.
Why it matters
The decision links a new tax directly to a specific wartime protection measure rather than general budget needs. If it works as designed, the mechanism would replace a slow, expensive private insurance market with a fast, government-backed payout system for businesses damaged by Russian missiles and drones.
What happened
Prime Minister Serhii Koretskyi said a 1-percentage-point VAT increase in the draft 2027 state budget is intended to finance a war-risk insurance programme for businesses hit by Russian strikes. The government initiated creation of a dedicated fund to provide rapid compensation for damage caused by Russian missiles and drones, with an estimated required Ukrainian contribution of around USD 1 billion. The government expects international partners to multiply that contribution by four, bringing the fund to USD 5 billion. Koretskyi said classic war-risk insurance is currently non-functional because of high costs and long waits for payouts, and that the new mechanism would deliver funds to entrepreneurs immediately after rescuers verify the destruction. A USD 5 billion fund, he added, would allow insurers to offer Ukrainian businesses affordable policies without having to reinsure abroad.
Background
Ukraine's government has launched the creation of a dedicated fund to compensate businesses for damage from Russian missiles and drones. The estimated initial Ukrainian contribution to launch the war-risk insurance mechanism is around USD 1 billion, with a total fund target of USD 5 billion through a fourfold contribution from international partners. Classic war-risk insurance has been described as non-functional due to high costs and lengthy waits for payouts.