The African Development Bank (AfDB) and the African Trade Insurance Agency (ATI) have announced the successful completion of a $500 million credit insurance deal. The deal is structured to cover a portion of AfDB’s portfolio of non-sovereign operations in Africa.
The ATI would be the direct insurer facing the African Development Bank, but the transaction, which is expected to encourage similar institutions to invest more on the continent in the future, will involve the participation of a number of Lloyd’s & Company private reinsurers who would share the risk on African financial institutions.
The deal will help many insurance companies operating outside Africa to participate in the financing of development of the continent for the first time. It will cover approximately 22 percent of the Bank’s $2.3 billion outstanding non-sovereign financial sector portfolio.
The insurance was specifically designed to protect the AfDB against the non-payment of loans made to approximately 30 African financial institutions.
The portfolio, which spans the African continent and includes exposure to financial institutions in all major regions of the continent, is expected to release sufficient capital to create almost $500 million to encourage more lending.
President of African Development Bank, 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”.