IFC uses credit insurance to distribute risk to private insurance companies on an unfunded basis. Our credit insurance syndications program enables private insurers to increase their exposure to long-term impact underwriting opportunities in developing economies, while giving IFC an additional source of third-party mobilization.
IFC currently uses these unfunded mobilization instruments both on individual loans to single borrowers and on multi-borrower loan portfolios created under the Managed Co-Lending Portfolio Program (MCPP).
How It Works
Credit insurance supplements IFC’s traditional funded syndications, allowing us to syndicate risk to new partners that do not have the ability to provide funding.
IFC signs a credit insurance policy or unfunded risk participation agreement with insurers, transferring a portion of the credit risk on new investments. With the insurers as a backstop, IFC can make larger commitments from its own balance sheet, while funding the entire amount of the borrower’s loan.
Benefits to Insurance Companies
- Diversification benefits for a class of investors who attach significant value to uncorrelated returns
- Capacity to create tailored global or sectoral portfolios
- Cost-effective delivery process that directly leverages IFC’s inbuilt capacity
- Under MCPP, priority access to IFC’s unique pipeline of assets and unrivalled ability to originate deals globally
- Standalone policies allow building their insurance capacity in new markets and assets, assisting their product development
Benefits to Borrowers
- Simple documentation and single source of funding reduce transaction costs and time to get a complete financing package
- Availability of insured amount on same terms as IFC, including longer tenors, removing the tail-risk associated with other syndications products
- Reduced complexity, by IFC being the sole interface for the borrower and setting all terms of the loan