The African Development Bank and African Trade Insurance Agency have announced the successful completion of a $500m credit insurance deal structured to cover a portion of the bank’s portfolio of non-sovereign operations in Africa.
This transaction, according to a statement, is expected to have an important demonstration effect to encourage similar institutions to invest more on the continent in the future.
While ATI will be the direct insurer facing the AfDB, the transaction involves the participation of a number of Lloyd’s & Company private reinsurers who will share the risk on African financial institutions.
The bank said this vehicle would enable many insurance companies operating outside Africa to participate in the financing of development in Africa for the first time.
The deal, according to the statement, is the second Balance Sheet Optimisation transaction under the ‘Room to Run’ initiative following the successful signing of the Synthetic Securitisation transaction in September.
It said the insurance would cover approximately 22 per cent of the bank’s $2.3bn outstanding non-sovereign financial sector portfolio.
The AfDB said it would protect it against the non-payment of loans made to approximately 30 African financial institutions.
According to it, the portfolio spans the African continent, with exposure to financial institutions in all major regions of the continent, and is expected to release sufficient capital to create almost $500m of headroom for new lending.
The President of the African Development Bank Group, Akinwumi Adesina, said, “This transaction leverages the bank’s own capital to achieve more development and lending as it creates new pathways for collaboration between private insurers and the bank in the development of the African continent.