Commission approves €1.5 billion Polish State aid scheme to support reinsurance for war-related risks to transport on the territory of Ukraine

This article is brought to you in association with the European Commission.

The European Commission has approved, under EU State aid rules, a €1.5 billion (PLN 6.4 billion) Polish scheme to provide State-supported reinsurance of insurance for transport on the territory of Ukraine. The scheme will contribute to maintaining and facilitating trade flows between Ukraine and Poland, the Member State with the longest land border with Ukraine, that have been disrupted by the ongoing Russian military aggression.  

The Polish scheme

Poland notified to the Commission a €1.5 billion scheme under which its public export credit agency (‘KUKE’) will provide reinsurance covering war-related risks (such as damages resulting from direct military operations, acts of sabotage, terrorism, uprisings, and riots) to insurance companies offering insurance for transport on the territory of Ukraine. Direct beneficiaries of the measure will be companies authorised to provide insurance services in Poland. Indirect beneficiaries will be transport companies authorised to provide their services in Poland and delivering goods on the territory of Ukraine.

The transport companies eligible for reinsurance coverage will be companies registered in Poland and authorised to carry out freight transport activities for hire or reward, or transport companies from other Member States with an established branch registered in Poland. The scheme remedies a market gap in the provision of insurance for war-related risks incurred by transport companies due to the ongoing Russian military aggression in Ukraine.

Under the scheme, the aid will take the form of public reinsurance. KUKE will cover 80% of the war-related risks, while insurance companies will retain the remaining 20%. The insurance companies, after subtracting the commission fee covering acquisition and administrative costs of the insurance, will pay to KUKE the adequate risk premium. This will ensure continued and adequate risk assessment and pricing. Standard commercial risks associated with the transport of goods are not covered by the scheme. The scheme will be in place until 30 June 2027.

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities subject to conditions.

The Commission found that:

• The scheme is necessary, appropriate and proportionate to facilitate the development of transport services essential to conducting trade in goods between Member States and Ukraine and the underlying insurance services during times when no purely private market solutions are available.
• The scheme has an incentive effect, as the beneficiaries would not carry out the relevant activities without the public support.
• Poland has put in place sufficient safeguards to ensure that the scheme has a limited impact on competition and trade within the EU. In particular, the scheme is open to all insurance companies already authorised in Poland as well as to new entrants to the Polish insurance market. The participating insurance companies will also retain a sufficient level of risk. Furthermore, the scheme is open to all transport companies authorised to provide their services in Poland.

On this basis, the Commission approved the Polish scheme under EU State aid rules.

Background

Besides State aid being granted on the basis of Temporary Crisis and Transition Framework, which enables Member States to use the flexibility foreseen under State aid rules to support the economy in the context of Russia’s war against Ukraine, State aid can be assessed and approved directly under Article 107(3)(c) TFEU, which enables Member States to support the development of certain economic activities under certain conditions. The support should remain necessary and proportionate and not adversely affect trading conditions to an extent contrary to the common interest.

The non-confidential version of the decision will be made available under the case number SA.111121 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.