Underwriting Ukraine: market efforts continue amid wheat harvest countdown – McGill and Partners

Despite any clarity about how or when the war in Ukraine might end, there are already plans and funds in place to rebuild and finance Ukraine’s economic recovery, even while the hostilities continue with daily tragic consequences for the country in its defensive fight against Russia.

McGill and Partners is among the London market insurance companies engaged with seeking solutions to Ukraine’s risk transfer needs during and after the conflict.

Harry Floyd (pictured), a partner at the broker’s London office, discussed the need to maximise the war-hit country’s grain exports, port infrastructure and storage silos for which have been an on-off target of Russian missile strikes in the south of the country.

Prewar Ukraine was the seventh-largest exporter of wheat, according to the US Department of Agriculture. Disruption to that market was one factor that led to a rise in food prices in 2022 and 2023.

Statistics from the Center for European Policy Analysis estimated wheat prices rose 50% immediately after the invasion, although Ukraine’s military successes in the Black Sea in recent months have helped raise exports in the past year.

It is a subject that McGill and Partners monitors closely, while trying to find solutions. It is also an issue with a ticking clock as solutions need to be in place within the next quarter.

“To make the most of the harvest this year, we need to try and export more grain from Ukraine into Europe, but not just by the Black Sea route,” Floyd said.

“Essentially that means by rail. On top of that, you have the dynamic of the Ukraine operating on a Russian-gauge railway and then having to buffer onto a different gauge. So, you need a land port and a grain-transfer station to move it across Poland and into Europe. And you need infrastructure in place by September for that,” he added.

Other industries will be important to boosting Ukrainian economic activity, he explained.

“There are textile factories looking to relocate from the conflict-affected eastern parts of Ukraine to more-benign areas of the country, and they’re going to need insurance and loans from banks in order to do that,” Floyd said.

“The country itself has a low insurance penetration compared to nations at the other end of the spectrum like Australia or New Zealand. It’s something like 1% or 2%,” he continued.

Just the renovation itself, said Floyd, is going to need support from other types of local business, all of which will have demand for insurance, and there is significant demand for more than war risk cover.

War risk tends to grab headlines, but there is also demand for more traditional property and casualty insurance covers, most of all construction capacity for Ukrainian risks.

Supplies such as glass and cement that will be needed to rebuild buildings and infrastructure will have to be produced, he explained, meaning that there will be a demand for factories producing these goods.

Sitting alongside Floyd was his colleague Hamish Greenwood, head of crisis management at McGill and Partners, who said that the company “has irons in many other fires”, amid high demand for closely linked products such as war risk, political violence and terrorism insurance.

“We’ve found ourselves working on challenging opportunities like mining in some tough territories, but that is exactly the kind of business that we’ve wanted to work on, where it’s really complex and challenging,” Greenwood said.

He emphasised McGill’s relatively small size as a broker, suggesting it can be “more nimble” than some larger intermediaries engaged in the same specialty insurance business classes.

“It’s an area where we can put a lot of our time in and provide real value for clients. We’re not set up for huge amounts of volume – we’d rather work really in depth on specific clients,” Greenwood added.