COTONOU, 1 July, 2019 – Insurers, reinsurers and brokers from the world’s largest insurance market, Lloyd’s of London, are gathering in Cotonou this week, confirming that the government of Benin, with an estimated 6.7% GDP growth rate in 2018, is drawing attention as a prime destination for global investors. Political risk and credit insurance provides the backbone of many major investments in Emerging Markets but for decades capacity constraints on this insurance in Africa prevented a greater flow of investments to the region.
In 2018, the government of Benin began changing this narrative. The government raised new commercial loans by structuring their borrowing request supported by ATI insurance to cover its sovereign risk. At the same time, the Minister of Finance also took the unprecedented step of meeting with the Lloyd’s insurance market to reinforce the country’s positioning as a robust sovereign risk. These initiatives have helped attract new institutional investors from Asia and Europe, who for the first time, are taking a keen interest in an emerging class of innovatively structured sub-Saharan Africa sovereign debt.
In addition to the Lloyd’s and other private insurance markets, some of the world’s largest financial institutions are also in Cotonou. Banks such as Mitsubishi UFJ Financial Group (MUFG), Japan’s largest bank; Deutsche Bank and Sumitomo Mitsui Banking Corporation (SMBC) are attending an Investor Roundtable taking place on the side lines of the Annual General Meetings of the African Trade Insurance Agency (ATI) from 4 – 5 July.
ATI is Africa’s only multilateral investment and trade credit insurance provider. In the last 18 months, the company has unlocked US$1.5 billion of hard currency borrowing for Benin and Côte d’Ivoire by de-risking their debt and, in the process, the demand from other countries across Africa has grown significantly.
The Lloyd’s of London insurance market underwrites approximately 25% of the world’s investment risk insurance, of which Africa represents a growing portion. In 2018 Lloyd’s as a whole had £35.5 billion in Gross Exposures and on a daily basis, the market sees more than £100m in premiums and close to £50 million paid out in claims. ATI has partnered with Lloyd’s and other private insurers over the last decade in order to de-risk Africa and to unblock one of the biggest barriers to investments.
Quote from John Lentaigne, Acting CEO, African Trade Insurance Agency
“Benin is a leading light in Africa, proving that African risk can be bankable to global investors, even those investors previously unable by mandate to invest in sub-investment grade markets. The level of investors attending this meeting is proof that Benin is raising the bar for other African countries to follow and signalling that a de-risked Africa has the potential to move to the next level in attracting long-term investments with countries elevating themselves to middle-income status.”