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| QBE del Istmo Reinsurance Company, Inc. |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 26880 |
| Company name | QBE del Istmo Reinsurance Company, Inc. |
| Country |
| Latin America Region | (IDA) |
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| Sector | Reinsurance |
| Environmental category | C |
| Department | Reg Ind, Financial Markets, CAF/CLA |
| Status | Active |
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| Date SPI disclosed | November 20, 2009 |
| Projected board date | December 21, 2009 |
| Previous Events | Invested: September 3, 2010
Signed: March 30, 2010
Approved: March 29, 2010 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The proposed investment in QBE del Istmo Re (the “Company” or “QBEDIR”) fits well with IFC’s industry strategy to support locally-based reinsurance companies that have a regional focus. By providing insurance for insurance companies, reinsurance companies support the industry in managing its business more effectively in the context of risk, uncertainty and volatility of insurers’ underlying underwriting and business activity. In addition, reinsurers also provide expertise and services to primary insurers, especially in the fields of product development, pricing, underwriting and claims management. This is particularly useful in developing markets where access to insurance skills may be limited and costly. In recent years, reinsurers have additionally served as an invaluable source of capital relief and flexible financing not otherwise available to insurers, other than reverting back to shareholders.
The Company is an established regional player that is expected to grow rapidly in the coming years as a result of the strong management team and market growth potential. The proposed project supports the development of the insurance and reinsurance sectors in the Latin American and Caribbean regions through an investment package that will enable an experienced regional player to further expand and provide a broader range of products while also improving its corporate governance standards. This project is expected to strengthen the capital structure of a regional reinsurance player active in over 20 countries; and to support the Company’s growth throughout the regions. |
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| Project sponsor and major shareholders of project company |
The Company is a full-line reinsurer with over 30 years in the Latin American market. QBEDIR is comprised of reinsurance, insurance, brokerage and dental service operations and has generated net written premiums of approximately $100 million in 2009. The equity of the Company as of end-2008 was $72 million. QBEDIR’s business model is based on serving small to medium sized local insurance companies in Latin America and the Caribbean, where its technical expertise is sought out. The Company’s management maintains a clearly-defined strategy, driven by a proven ability to identify and exploit market niches, especially through retail insurance solutions that are targeted to improve quality of life among lower and middle-income population.
QBEDIR is associated with QBE Insurance Group and is managed by domestic shareholders. The main sponsor is Ramón Fernández, who together with the Company’s management group controls 60% of the Company and has ample experience in the reinsurance sector having worked for the Company for about two decades. Furthermore, the two additional members from the management buyout in 1993 (Gilberto Vega and Ricardo Batista) continue to operate at a senior management level and provide continuity. QBE Insurance Group’s acquisition of 40% the Company in 1999 has provided the Company with the international leverage necessary to significantly increase its market penetration and bringing the Company to its current market-leading position among local insurance companies across the region. |
| Total project cost and amount and nature of IFC's investment |
IFC’s proposed investment consists of (i) US$10million in preferred shares and (ii) an equity investment of up to $9.0 million for up to 7.5% capital share.
IFC is working with Inter-American Investment Corporation (“IIC”) in order to leverage funding. IIC is considering an investment in preferred shares of the Company together with IFC. The funds will be used to: (i) increase underwriting capacity of the Company, (ii) fund strategic regional expansion, and (iii) furthering new product lines, such as micro-insurance and health care, specifically dental plans. |
| Location of project and description of site |
| While QBEDIR is based in Panama, most of its written premiums are created across the Latin American Region with Mexico 65% and Colombia 17% being the largest exposures. |
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| Anticipated development impact of the project |
Developmental impact of the Project is expected to be strong in the following areas:
Expand the availability of insurance services throughout the regions, which are underserved by global insurance players;
Serve as a catalyst for the development of an insurance industry throughout the Latin America and Caribbean regions;
Support the development of new insurance products like dental insurance that will target the low to middle income segment of the population. |
| IFC's expected development contribution |
The Project provides strong additionality, since IFC, a long-term multilateral investor, can provide a positive signal to the market:
The involvement of IFC will diversify the shareholding structure and will provide for a stronger corporate governance structure. IFC will seek to set up strong governance through participation on the Company’s Board and strengthening of investment policies and guidelines. Through its presence on the Board of Directors, IFC will be able to ensure that QBE del Istmo complies with corporate governance best practices.
By investing at this juncture, IFC provides a “seal of approval” as a strong, reputable, investor during the coming years of the Clients expansion through the region and thereby assist it in maintaining its strong credit rating. |
| Environmental and social issues - Category C |
| Since the Company is engaged in the business of reinsurance it has been classified as a Category C project according to IFC’s Environmental and Social Review Procedure. No further review is required. QBE del Istmo is required to inform IFC in the event of any change in nature or scope of its business or operations. |
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| For inquiries about the project, contact: |
Ramon Fernandez M
Vice President
QBE del Istmo Compania Reaseguros, Inc.
Costa del Este
Avenida Paseo del Mar
Calle Vista del Pacifico No. PH-1
Apartado Postal 0816-03239
Republica de Panama
ramonfm@istmore.com
www.istmore.com
or
Levan Shalamberidze
Senior Investment Officer
IFC Global Financial Markets
lshalamberidze@ifc.org |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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