MIGA's Ukraine Response
Impact of the Russian invasion of Ukraine to international development agenda
The Russian invasion of Ukraine has had significant adverse impacts on the development agenda, not only within Ukraine but regionally in Europe and globally. It has inflicted severe humanitarian and socio-economic consequences:
- In 2022, Ukraine's GDP plummeted by 29% due to the invasion, resulting in rampant inflation and a sharp increase in unemployment.
- In the same year, approximately 7.1 million Ukrainians fell into poverty, and the country’s exports, especially food grains, decreased significantly.
- The invasion escalated regional crises, leading to an influx of refugees, and driving up energy and food costs in Europe, which in turn contributed to inflation and exacerbated social inequality.
- On a global scale, the war disrupted food and energy markets, posing a risk to food security for several countries.
Addressing this immense crisis requires a combination of public and private financing to support Ukraine’s recovery and reconstruction.
MIGA’s role in responding to the crisis
Access to insurance is crucial for economic stability, but heightened risks led private insurers to withdraw from Ukraine. This withdrawal has resulted in a severe shortage of insurance options in the country.
Addressing the ongoing humanitarian crisis in Ukraine and bolster reconstruction efforts will require active government intervention and private sector capital. The availability of insurance, whether it is property insurance, ship cargo insurance, personal travel insurance, or crop and livestock insurance, from various providers is critical towards mobilizing private sector capital. Political Risk Insurance (PRI) is especially vital during conflicts as it protects investments from non-commercial risks, such as war damage.
In the context of the ongoing war, most investors deem the availability of PRI as a pre-requisite, even when investing alongside a multilateral or international financial institution (IFI) in Ukraine. According to the Rapid Damage and Needs Assessment (RDNA2), Ukraine will need approximately $514 million in support from IFIs and donors for PRI guarantees and reinsurance in 2023 alone.
As of September 1, 2023, MIGA has been a proactive provider of insurance in Ukraine, issuing more than $185 million in PRI guarantees since the Russian invasion began in February 2022. Through these efforts, MIGA has actively encouraged cross-border investment into Ukraine. MIGA’s guarantees serve as a key risk mitigation tool, ensuring the continuity of private sector operations and investments for the country’s recovery and reconstruction. MIGA’s support also enables these projects to operate transparently and in alignment with global best practices concerning integrity, environmental, social, and climate aspects.
MIGA remains committed to supporting Ukraine's development and humanitarian efforts through a range of initiatives.
Supporting Ukraine: MIGA’s Strategic Approach
MIGA aims to unlock domestic and international markets while mobilizing resources for Ukraine’s reconstruction.
Outside Ukraine, MIGA will leverage its existing war and civil disturbance risk coverage and experience in insuring investments in fragile and conflict affected areas (FCS) to attract international donors and reinsurers into Ukraine.
Within Ukraine, MIGA will facilitate private sector engagement in the recovery and reconstruction process by mitigating the risks associated with war damage and creating opportunities for co-financing. MIGA’s guarantees, which complement and supplement the grants and loans provided by the World Bank to the government of Ukraine (GoU), and the investments and loans available to the private sector from IFC and other partners will play a pivotal role in mobilizing the private sector funds for reconstruction.
MIGA has adopted a phased approach in supporting the private sector in Ukraine
- During the ongoing war and initial reconstruction (Phase 1), MIGA has and will continue to support the trade in goods and services. This support is provided through our trade finance guarantees, in collaboration with the IFC, EBRD and other partners. Additionally, MIGA has provided and will continue to support with liquidity and working capital to the private sector by offering PRI guarantees to international banks with branches in Ukraine. Furthermore, during Phase 1, MIGA will selectively consider long-term projects in the real sector. MIGA’s trade finance guarantees will facilitate trade with Ukraine, ensuring the uninterrupted flow of critical imports, such as drugs, food, fuel, and fertilizer. MIGA’s PRI guarantees will enable international bank subsidiaries in Ukraine to extend more loans, bolstering crucial liquidity in the economy. This support is particularly vital for small businesses facing challenges due to the ongoing war. In the real sector, MIGA’s guarantees will include support for the relocation of projects from the conflict-affected eastern parts of Ukraine to more secure areas within the country.
- Upon the stabilization or cessation of the war, either entirely or in specific regions of Ukraine (Phase 2), MIGA will fully deploy its products. This will involve offering PRI guarantees for real sectors on a larger scale, in addition to the products already provided during Phase 1.
MIGA closely coordinates its support for Ukraine with the IBRD and IFC through the MRII initiative, implementing a ‘One World Bank’ approach. MIGA has also established partnerships with various organizations actively supporting Ukraine, including EBRD and the U.S. Development Finance Corporation (DFC), to execute its projects. Through the Support to Ukraine’s Reconstruction and Economy Trust Fund (SURE TF), MIGA collaborates with donor countries which provide concessional financing to support its guarantee issuance in Ukraine.
Deploying guarantees in Ukraine
Due to the increased risks associated with operating in Ukraine during the ongoing war, MIGA utilizes the SURE TF to facilitate its guarantee issuance. MIGA combines donor financing from the SURE TF with risk exposure on its own balance sheet and seeks to attract public and private reinsurance when available to deploy guarantees in support of Ukraine. The combination of public and private capacity will adapt and evolve depending on the severity of the conflict in Ukraine and the stage of reconstruction.
MIGA expects the SURE TF, which was established with Japan’s critical anchor contribution of $23 million, to grow to $300 million through contributions from additional donors. MIGA is also actively fundraising toward this end. Learn more about the SURE TF here.
Projects MIGA has supported or is considering providing support in Ukraine after the Russian invasion
Regional Head, Central and Eastern Europe & Central Asia