Sunak Unveils War-Risk Scheme to Spur Ukraine Reconstruction

Jorge Valero, Alberto Nardelli and Olesia Safronova
·3 min read
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(Bloomberg) -- UK Prime Minister Rishi Sunak announced the creation of a framework for war-risk insurance backed by the Group of Seven and designed to encourage private investors to help rebuild Ukraine.

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Speaking at the opening of the Ukraine Recovery Conference in London on Wednesday, Sunak said that while Russia must pay for the destruction it has inflicted during its invasion of its neighbor, a partnership of governments, international financial institutions and business leaders is also needed to underpin the nation’s reconstruction.

He said that more than 400 businesses from 38 countries with a combined market value of $4.9 trillion have signed up to the Ukraine Business Compact and encouraged investors to tap the City of London’s “deep and liquid capital markets and world-class finance expertise.”

The insurance framework “is a huge step forward towards helping insurers to underwrite investments into Ukraine, removing one of the biggest barriers and giving investors the confidence they need to act,” Sunak told conference delegates.

“With this and everything we do here we are sending a message,” he added. “That our support on the battlefield and beyond cannot be outlasted and that Ukraine’s incredible spirit will prevail.”

Ukrainian President Volodymyr Zelenskiy spoke to the conference immediately after Sunak via video link and said “the world is watching whether we will restore normal life in such a way that our transformation will land an ideological defeat on the aggressor.”

“By building Ukraine we are building much more than one country,” he added. “We are building the world that will be in the lifetime of our generation and after us. Whether it will be free and democratic depends on each of us.”

The World Bank has estimated that the cost of reversing the damage inflicted by Kremlin forces will be about $411 billion over the next decade, with $14 billion needed for critical spending this year alone. That figure will likely climb as fighting intensifies and costs related to this month’s dam breach rise.

US Secretary of State Antony Blinken also attended Wednesday’s conference and pledged an additional $1.3 billion in assistance to help Ukraine rebuild. Most of the funds will be directed to restoring the country’s energy grid and critical infrastructure ranging from ports to rail lines and border crossings.

“Recovery is about more than just ensuring people have what they need to survive — food to eat, water to drink,” Blinken said. “Recovery is about laying the foundation for Ukraine to thrive as a secure, independent country fully integrated with Europe, connected to markets around the world.”

The London gathering follows the European Union’s announcement this week of a proposed €50 billion package to cover Ukraine’s current expenditure and urgent reconstruction priorities through 2027.

European Commission President Ursula von der Leyen said the facility will be financed with grants from the EU budget, loans raised on capital markets and “eventually with proceeds from immobilized Russian assets.”

The EU’s executive arm will “come with a proposal for these assets before the summer break,” von der Leyen said in an address to the conference.

The cash-for-reforms plan will help Ukraine to meet Brussels’ demands to join the bloc. The nation wants to open accession talks with the EU by the end of this year.

While some progress has been made in areas including judicial reform, the government in Kyiv needs to boost efforts in fighting graft and money laundering, according to an interim EU report published Wednesday.

The International Monetary Fund has approved a package for Ukraine worth $15.6 billion over the next four years.

--With assistance from Alex Wickham, Daryna Krasnolutska, Aliaksandr Kudrytski, John Follain, Katharina Rosskopf, Iain Marlow, Patrick Donahue and Arne Delfs.

(Updates with Blinken comments starting in ninth paragraph)

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