IFC intends to invest in capital of Ukrainian insurance companies for first time – NBU governor
The International Finance Corporation (IFC) from the World Bank Group has for the first time announced its intention to invest in the capital of Ukrainian insurance companies, said Andriy Pyshnyy, Governor of the National Bank of Ukraine (NBU), in an interview with Interfax-Ukraine.
"The insurance market is developing rapidly. The main thing is that we now see healthy development because the market is transparent, financially stable, and free of schemes and fraudulent institutions. It is attractive for investment, as evidenced by the International Finance Corporation's intention to invest in Ukrainian insurance companies for the first time," he noted.
According to him, the most significant work to cleanse the market was carried out over the past three years, even during the full-scale war. The "split" reform slowed down first due to the pandemic, and then due to the full-scale invasion. However, the weight of systemic problems became unbearable with the beginning of the great war, so the issue of transformation became a matter of survival.
"Insurers made a quantum leap without the drama that we saw during the recovery of banks. There were also many players in this market without an adequate strategy or business model, with a football team instead of owners, and assets that existed only on paper," emphasized the NBU governor.
Pyshnyy also noted that the program with the International Monetary Fund, which began in December 2022, promoted market transparency.
According to him, the NBU did not have any specific plans to reduce the number of companies. However, over five years, the number of companies decreased by 3.5 times; most of them left the market voluntarily. At the same time, the market underwent structural and qualitative cleansing and the construction of a new philosophy, given the increase in the volume of market assets by 42% during this time (including a third during the large-scale war). An important stage of clarification took place that did not negatively impact market dynamics.
Thus, in 2020, the insurance market's share of the gross domestic product was slightly higher than it is now. However, this figure included fictitious reinsurance, one of the most popular tools for optimization schemes. These schemes have ceased, and the volume of domestic reinsurance decreased by more than 15 times over five years. Consequently, the insurance penetration rate has decreased somewhat.
According to the NBU governor, the share of insurance services in the GDP began to grow this year. We are talking about a completely different quality of insurance service and real insurance. As of October 1, the penetration rate was 0.84% of GDP. In neighboring Poland, this figure is 2%, so there is room for growth. "However, for a market operating under war and active transformation conditions, this is a pretty good result," he emphasized.