Finance

African Development Bank, UK and London Market Insurers enter new risk transfer partnership for climate action

Thursday, 20 October 2022 19:42
African Development Bank, UK and London Market Insurers enter new risk transfer partnership for climate action

(AfDB) - The African Development Bank, the government of the United Kingdom and three globally recognized insurance companies have closed on a new and innovative risk sharing transaction known as the Room to Run Sovereign.  

The Room to Run Sovereign transaction was structured with the intention of scaling up the African Development Bank Group’s commitments to climate finance by up to $2 billion and will go a long way in supporting African countries meet their Nationally Determined Contributions, or NDC’s.

The support provided by the United Kingdom and private insurers in this risk transfer arrangement, will allow the Bank to reduce the risk capital currently consumed by its sovereign operations, thus creating headroom for new lending operations in priority sectors, particularly climate finance, to help support more mitigation and adaptation projects across the African continent.  

The Room to Run Sovereign is a risk sharing arrangement based on a subset of the Bank’s portfolio of sovereign loans for up to 15 years, where the insurance market, namely AXA XL, Axis Specialty, and HDI Global Specialty, is taking a $400 million first loss tranche, while the United Kingdom’s Foreign Commonwealth and Development Office (FCDO) will provide a further $1.6 billion of cover, on a second loss basis, on the same subset portfolio of loans.

“The Bank believes this is a cutting-edge transaction that will tremendously assist it in playing its countercyclical role as the continent emerges from the impacts of the COVID-19 pandemic, while simultaneously facing the negative outcomes of the invasion of Ukraine which has contributed to the emerging food crisis. This transaction will help shore up the capital adequacy of the institution while ensuring we can do more for our clients, especially in the area of climate change action,” said the African Development Bank Group’s Vice President Finance and Chief Financial Officer, Hassatou N’Sele.

Vicky Ford, FCDO Minister of State for Development said, “I am delighted that the Room to Run Sovereign guarantee, which the UK committed to in May, is now finalised. I’d like to formally welcome our three new City of London insurance providers to the partnership. This $2 billion guarantee reflects the UK’s commitment to investing in climate related projects, driving clean growth and delivering global climate ambitions.”

The transaction covers current and future loans from eleven borrowing countries of the Bank Group’s non-concessional window. This is a welcome continuation of cooperation with private sector and institutional investors, following on the call by the G20 for Multilateral Development Banks to better leverage their balance sheets, and following the Bank’s two pioneering Room to Run Transactions on its private sector portfolio executed in 2018. It also reflects the positive outcomes of the G20 Recommendation on Capital Adequacy, released in September 2022.

The participation of both the private insurance market and the UK’s FCDO brings to the table an innovative PPP-type collaboration between DFIs and the insurance market, which helps in realizing the vision of the Addis Ababa Action Agenda. That agenda sets forth the ambition of responding to the significant needs required to fulfil the Sustainable Development Goals  through leveraging of the private sector.

“AXIS is proud to play a leading role in AfDB’s Room to Run Sovereign program, aligning the strength of our specialist underwriting with the London insurance industry’s ability to collaborate to support positive change,” said Richard Lamb, Head of Credit and Political Risks at AXIS’ Lloyd’s of London Syndicate.

“We are excited to support this landmark policy between the AfDB, the UK Government, and private insurers. The combination of an MDB’s unique lending capabilities and private insurer coverage can help unlock large amounts of capital to further assist countries and sectors in need of finance,” Nick Robinson, Head of Credit and Political Risk at HDI Global Specialty.

"This important transaction is further evidence of the importance of mobilisation by DFIs of unfunded insurance capacity from the private sector to support climate, mitigation and adaptation finance in Africa. This transaction demonstrates the significant risk bearing capabilities of the insurance market when collaborating with a DFI and the potential that insurance products can provide for increased development-focused lending”, Simon Bessant, Director at the Texel Group, insurance broker to the African Development Bank for the Room 2 Run Sovereign transaction.

The Room to Run initiative is built on the general balance sheet optimization objective of the African Development Bank. This aims to improve the Bank’s risk capital metrics, support additional lending to enable it to meet institutional and global development objectives and to lead on innovation and demonstrate impact to attract institutional investors to Africa.

bad



 
Telecom


 
Public Management


Ecofin Agency covers the news from 9 business sectors in Africa: Public management, Finance, ICT, Agribusiness, Electricity, Mining, Oil and Gas, Comms and Laws. Ecofin Agency is also creating and management specialized medias, in paper and on the web/social networks, for institutions or African publishers.

AGENCE ECOFIN

Mediamania Sarl
Rue du Léman, 6
1201 Genève
Tél: +41 22 301 96 11

REDACTION
redaction@agenceecofin.com

Public management
Aaron AKINOCHO
Borgia KOBRI
Moutiou ADJIBI

Finance
Idriss LINGE
Walid KEFI
Chamberline MOKO

Agribusiness
Espoir OLODO

Electricity
Gwladys JOHNSON

Oil and Gas
Olivier DE SOUZA

Mining
Louis-Nino KANSOUN

ITC 
Muriel EDJO

Comms
Servan AHOUGNON

Cameroon
Brice R. MBODIAM
Sylvain ANDZONGO
Monique MAY
Julienne Rose SENDE

Togo
Fiacre E. KAKPO
Waliyullah TAJUDEEN
Séna AKODA

Niger
Sandrine GAINGNE

Gabon
Stephane BILLE
Pierre-Celestin ATANGANA

Desk
Stéphane ALIDJINOU
Souha TOURE
Vahid CODJIA
Diane ZODEHOUGAN
Hikmatu BILALI

Translation
Schadrac AKINOCHO
Mouka MEZONLIN
Firmine AÏZAN



Digital
Omar SOKHNA
Mamadou DIOP
Bacary MANE
Abdel Razak MOULIOM

Digital Marketing
Jérémie FLAUX
Geraud ACHI
Jean Christian BERNARD
Franck FOUTE

Web publishing
Bakoly RAHARISOA
Rina RAMANANDRAISOA
Hasina RAJEMISON

Development
Dominique FLAUX

 


 
REGIE COMMERCIALE
AGENCE ECOFIN
Rue du Léman, 6
1201 Genève
Tél: +41 22 301 96 11
Fax: +41 22 301 96 10

Benjamin FLAUX
bf@agenceecofin.com 
Tél: +41 22 301 96 11 
Mob: +41 78 699 13 72

Voir page 
Nos services
 

 










 



Ecofin Agency is a news agency for economic and sectorial information. It was created in 2010 and it website was launched in June 2011.

Please publish modules in offcanvas position.