US$3bn facility cranks up IFC credit insuranceThe International Finance Corp has accelerated its groundbreaking use of credit insurance to expand lending in emerging markets with a new US$3bn facility, the World Bank group private sector financier’s first to cover the risk on portfolios of corporate loans. The “Managed Co-Lending Portfolio Programme Real Sector” facility involves 14 insurers: Allianz Trade, Aspen, AXA XL, Axis Capital, Chubb, Everest, The Hartford, HDI Global, Liberty Specialty Markets, Munich Re, Scor, Sompo, Swiss Re and Tokio Marine. That compares with just two in the supranational’s inaugural US$1bn credit insurance programme in 2017. Known as “FIG I”, that inaugural deal with Liberty Mutual and Munich Re covered a portfolio of IFC loans to emerging market financial institutions for lending to end-borrowers. Subsequent deals of US$2bn involved six insurers in 2020 (“FIG II”) and a record US$3.5bn had 13 providers in 2023 (“FIG III”). The IFC's overall "managed co-lending" effort includes this FIG trio, the new real economy facility and a US$10bn-plus second, funded stream involving institutional B loan co-investors such as Allianz, AXA and Eastspring Investments and co-lending trust funds for public sector investors like China’s State Administration of Foreign Exchange and the Hong Kong Monetary Authority. The supranational has mobilised some US$19bn of risk and lending capacity through its various MCPP initiatives. Direct exposure The real economy facility takes the IFC’s growing insurer group – which added Chubb to the 13 FIG III participants and also included all providers that committed to FIG I and II – into new territory. Unlike the FIG programmes, it gives direct exposure to an array of economic sectors. The IFC cites agribusiness and forestry, construction, education, energy, health, life sciences, manufacturing, media and technology, metals and mining, real estate, retail, telecoms, tourism, transport and water and waste management. “You have such a diversity of assets coming in, not only geographically, but structurally,” said Vera Sevrouk, senior syndications officer at the IFC. The IFC’s loans to the sectors covered differ significantly in maturity and size. It appears likely that the facility’s US$3bn capacity will eventually cover hundreds of loans. Moreover, all the IFC’s countries of operation are eligible – including the poorest that qualify for grants and concessional loans from its sister, the International Development Association. Transactions in the IDA countries use credit enhancement via securities or guarantees to get them up to the programme’s Single B rating floor. “It's almost like we are pre-mobilising,” said Kruskaia Sierra-Escalante, senior manager, co-investor solutions at the IFC. “This is a policy that will allow us to effectively provide lending to future projects. We agree upfront with the insurers on eligibility criteria [and] it allows us to do it in a programmatic level for our clients.” Equally, although the IFC has obtained cover on individual real economy corporate loans in the past via some 50 private transactions, “from the insurers’ perspective, they don't need to be going project by project”. Immersive experience Participants in the new facility spent three days at the IFC’s headquarters in Washington to gain insights into its origination and due diligence. This immersive experience, which Sevrouk characterised as “an extremely deep process of understanding each other's risk profiles and investment goals”, included discussions with sector leads, credit officers and industry specialists. Insurers “are putting trust in our ability to identify transactions, do our due diligence. They basically are looking at the risk one, two years ahead of time”, Sevrouk said. “We need to continue to originate good assets so
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