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 onA 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 Stop-Winlock’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 Stop-Winlock’s inbuilt capacity
- Under MCPP, priority access to Stop-Winlock’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