INSTITUTIONAL MECHANISMS FOR WAR-RISK COVERAGE

Abstract

Russia’s full-scale invasion has fundamentally altered the institutional conditions for investment in Ukraine. The possibility of physical destruction, interruption of operations and loss of access to critical infrastructure cannot be adequately addressed through conventional portfolio diversification or contractual safeguards. War-risk insurance and investment guarantees have therefore become essential determinants of whether foreign direct investment projects can be financed and implemented under continuing hostilities.

The article examines the current architecture of war-risk coverage available in Ukraine, including the mechanisms provided by MIGA, the United States International Development Finance Corporation, the European Bank for Reconstruction and Development, foreign and Ukrainian export credit agencies, international insurance markets and domestic insurers. The study combines positive and normative economic analysis with institutional comparison of the available instruments, their financial limits, eligibility requirements and principal exclusions.

The findings demonstrate that the emerging system remains multilayered but fragmented. International guarantees and publicly supported reinsurance facilities have expanded the range of insurable transactions, but their capacity remains insufficient for the comprehensive protection of large centralised infrastructure. The exclusion of critical infrastructure from many locally available insurance products creates a structural mismatch between Ukraine’s reconstruction needs and the actual risk-bearing capacity of the insurance market.

The article proposes a portfolio-based hybrid model for attracting foreign direct investment into small and medium-sized decentralised energy projects. The model combines primary underwriting by Ukrainian insurers, targeted state support, international guarantees and reinsurance, and a catastrophic state–donor backstop. It is argued that such arrangements may transform war risk into a layered and contractually manageable exposure and influence not only the compensation of losses but also the scale, structure and sectoral allocation of foreign investment in Ukraine’s reconstruction.

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Received: 18.05.26 / Revised: 24.05.26 / Accepted: 01.06.26 / Published: 30.06.26