Innovation and collaboration in credit insurance: Two strategic sides of the same coin

ICIEC leverages innovative solutions and strong partnerships to tackle global challenges and foster sustainable growth in member countries.

No sooner had ICIEC, the multilateral insurer of the Islamic Development Bank (IsDB) Group, welcomed the Togolese Republic as its 50th member state on 2 September 2024, than a delegation from the Corporation was on the ground in Lome for talks with H.E. Mr Essowè Georges Barcola, Minister of Economy and Finance of Togo.

The urgency of the talks is hard to overstate. They reflected two sides of the same development coin, both contributing to the common purpose of supporting the country’s sustainable development agenda and fostering economic collaboration.

On the one hand, we explored Togo’s general economic planning, borrowing requirements, financial management practices, and current and future investment needs. On the other hand, we delved into the alignment of Togo’s financing objectives with ICIEC’s terms and conditions to ensure financial close of a long list of priority projects.

Our partnerships and innovative approach

ICIEC provides robust credit and PRI insurance and risk mitigation solutions to make transactions and projects bankable and conducive to private capital participation. It also seeks to enhance economic resilience and support its member states in attracting Foreign Direct Investment (FDI) and fostering trade opportunities.

As a subscriber to the Principles of Responsible Insurance and a host of other international conventions, ICIEC places innovation and partnerships at the centre of our modus operandi. Over the last 30 years, we have forged more than 172 partnerships with national ECAs, reinsurers, banks, and other multilateral institutions, some preceding the promulgation of Goal 17 of the UN’s Sustainable Development Goals (SDGs).

We are unique as the only multilateral insurer in the world that operates exclusively on alternative financial and insurance risk mitigation solutions called Takaful, based on the Islamic intermediation principle of mutual solidarity. Since its inception in 1994, ICIEC has cumulatively insured business amounting to $121.2 billion, including $96 billion in export credit and $25.2 billion in investment insurance. This remarkable achievement would not have been possible in the mere space of three decades without policy and product evolution and innovation in line with international best practices, as well as collaboration across the export credit and investment insurance ecosystem.

Innovation and partnerships remain key to unlocking the opportunities and mitigating the challenges presented by the huge needs of climate-related finance, food insecurity, progress towards the UN SDGs, the clean energy transition, future pandemic preparedness, eradicating macroeconomic inequalities including access to vaccines, and rebuilding fragile health systems—all in the pursuit of resilience and building back better for all stakeholders in our member states.

Partnering for global resilience and growth

At ICIEC, we believe in the power of partnerships and innovative approaches to addressing complex challenges in a world of financial, market, and geopolitical uncertainties. In August 2024, for instance, we signed a landmark MoU with the Japan Bank for International Cooperation (JBIC) to enhance cooperation and support the development of trade and investment flows between ICIEC’s member states and Japan, leveraging ICIEC’s insurance services and JBIC’s financial facilities.

This bespoke partnership builds on a longstanding relationship and will facilitate new transactions involving Japanese companies as exporters, EPC contractors, or investors in projects that promote the development of ICIEC’s member states, with a particular focus on Central Asia. By leveraging our respective expertise and resources, we can enhance trade and investment opportunities for the mutual benefit of our stakeholders.

Moody’s Ratings in two reports in September 2024 warned that global climate investment to date falls short of the trillions needed to achieve net-zero emissions by 2050 and adapt to the physical effects of climate change. While closing this investment gap will drive up government debt, the costs of inaction would be larger.

According to Moody’s, governments cannot finance this investment gap alone: their spending would need to increase by 1.8% of GDP annually until 2030. The fiscal strength of most member countries could weaken materially, as government debt is driven up commensurately by the aforementioned spending increases. Burden sharing with the private sector through crowding in blended financing, and through win-win Public-Private Partnerships (PPPs), could reduce government spending by half, to about 0.9% of GDP annually up to 2030. Not surprisingly, Africa, the Middle East, and South Asia - where most ICIEC member states are located - suffer disproportionately in the investment gaps for climate mitigation and adaptation.

The UN SDGs Report 2024 estimates that achieving the SDGs in developing countries by 2030 will require an annual investment of $4 trillion. Here ICIEC has led from the front in several initiatives over the last few years through value-added interventions. The Arab Africa Guarantee Fund (AAGF), initiated by ICIEC as the insurance pillar and other partners under the Arab-Africa Trade Bridges Programme (AATB), is aimed at trade and investments in food security.

The Africa Co-Guarantee Platform (CGP) was established by ICIEC, AfDB, the African Trade & Investment Development Insurance (ATIDI), AUDA-NEPAD, and GuarantCo. GuarantCo is part of the Private Infrastructure Development Group (PIDG), which is supported by the governments of the UK, Switzerland, Sweden, Netherlands, and Australia. The CGP focuses on infrastructure development in Africa and is intended to increase the volume of insurance and guarantee solutions available to project sponsors and their bankers in a market-responsible manner. Our objective is to mobilise greater amounts of investment that would otherwise not take place in the region in the absence of affordable risk mitigation products.

ICIEC’s membership of IRENA’s Energy Transition Accelerator Financing (ETAF) Platform aims to promote renewable energy production in member states. ICIEC and its parent institution the IsDB have pledged $250 million to ETAF by 2030.

Driving sustainable development through risk management

Sustainable investment is firmly embedded in our due diligence process through linking all new business and other queries with SDG and climate action indicators. We actively target real economic impact and measurable change in all financing and underwriting activities in the projects we support. In doing so, we act as a catalyst for mobilising private sector capital towards achieving the SDGs.

Private sector engagement in sustainable development requires credit enhancement. Insurers like ICIEC are uniquely positioned to provide this, leveraging their sustainability policies and access to their member countries’ national and subnational bodies. These bodies engage with relevant climate action and food security projects and transactions. Not surprisingly, private sector collaboration is one of the main pillars of ICIEC’s strategy. Risk mitigation tools play a crucial role in enabling corporates and banks to contribute meaningfully to positive development project outcomes. By effectively managing risks, these tools can unlock commercial opportunities and facilitate greater private sector engagement in sustainable development initiatives.

With a partnership extending over 13 years, Mr Felix Winthrop, Head of Credit Insurance and Reinsurance, AXA XL, is generous in his observation that “our partnership with ICIEC has facilitated cross-border trade and investment, propelling economic prosperity across member states. Their dedication to rigorous risk management instils confidence, allowing us to navigate challenges and achieve mutually beneficial outcomes. We are honoured to contribute to their unique mandate and look forward to many more years of collaboration and positive impact.’’

As ICIEC continues to grow, we remain steadfast in our commitment to providing innovative and tailored insurance solutions that empower our member states to achieve their economic goals. Recent trends highlight a growing migration towards and confidence in ECA-backed finance, a trajectory which industry experts anticipate will persist. The rise in capital projects and infrastructure, especially those focused on sustainability and ESG, presents exciting opportunities and significant challenges. Driven by climate action, food security, and the clean energy transition, this growth not only amplifies demand but also introduces a new landscape of risks. ICIEC is well-positioned in this evolving environment, acting as a trusted partner in advancing development goals across our member states.