Kenya hosts historic meeting on the coast - African Trade Insurance Agency

Kenya hosts historic meeting on the coast

KILIFI, 21 March, 2018 – Kenya is hosting a landmark meeting as the world’s export credit agencies, multilateral financial institutions and private credit and investment insurers gather to discuss the state of their industry. These institutions, including the African Trade Insurance Agency (ATI), who are hosting the event, are all members of the respected Berne Union. The umbrella body is the leading global association for the export credit and investment insurance industry comprised of 85 companies from 73 countries. Together, these institutions support 14% of global exports representing over USD2 trillion in facilitated cross-border trade.

Honourable Henry Rotich, Kenya’s Cabinet Secretary for the National Treasury stated “Kenya is honoured to be hosting this important meeting of these insurers that underpin a large amount of global investments and financing. In fact, this meeting is shining the spotlight on Africa at an opportune moment. The continent now has six of the world’s ten fastest growing economies. Add to this, Africa’s renewed emphasis on infrastructure development combined with innovation, natural resources and improved regulatory structures. Quite simply, the message we would like to relay to the global investment community through this meeting, is that Africa is brimming with opportunities.”

These companies and institutions are a vital link to investments because they provide the necessary investment and trade insurance support required by global lenders and investors. Without this, most large investments around the world would not otherwise take place.

“By all accounts, 2017 was an excellent year for Berne Union members and once again we made a tremendous positive impact on global cross-border trade and investment. While there are a number of significant challenges facing our industry, we are well-placed and well-resourced to adapt and to continually improve our support to trade and investment globally,” commented Topi Vesteri, the President of the Berne Union.

The members of the Berne Union provide an important link in the flow of goods, services and investment capital worldwide. Many African countries continue to face constraints in accessing significant and affordable long-term financing. This is mainly due to their sub-investment grade ratings and uncertainty around political and regulatory issues. The Berne Union members play a key role in unlocking this financing.

Historically, insurers had limited capacity to cover political and commercial risks in Africa. This was one of the key drivers behind the establishment of the African Trade Insurance Agency. However, in order to bridge the considerable trade and foreign direct investment gaps in Africa, developing and strengthening partnerships in the global insurance market is vital. The Berne Union is a key platform to develop such relationships.

Vinco David, the Secretary-General of Berne Union noted “In 2017 Berne Union members collectively covered trade to African countries for an amount of USD 80 billion. That is a significant support for the development of this continent. In addition, last year Berne Union members also supported USD 9 billion of foreign direct investment into Africa in areas such as infrastructure, power generation including renewable energy, and mining.”

The investment insurance industry consists of both private and public institutions and a number of multilaterals, namely ATI, The Arab Investment & Export Credit Guarantee Corporation (DHAMAN), the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC) and the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

The public companies are also called Export Credit Agencies (ECAs). Export Credit Agencies provide government-backed loans, guarantees and insurance to their home-grown corporations that seek to do business overseas in developing countries and emerging markets. Through their respective ECAs, these countries arm their exporters and investors with the tools to be competitive and access financing to fund their overseas businesses.

Some of the ECAs, attending this year’s Berne Union Spring Meeting include China’s Sinosure, France’s BpiFrance (split-off from Coface), Germany’s Euler Hermes, India’s ECGC, Italy’s SACE, Japan’s NEXI and the UK’s UKEF among others.

George Otieno, the CEO of ATI commented during the event, “ATI is making tremendous inroads to attract the necessary insurance capacity to cover, in particular, Africa’s infrastructure ambitions. Our membership to the Berne Union and ATI’s ability to host this meeting successfully, with the support of the Government of Kenya, is proof that we are fulfilling our mandate: to change global perceptions about African risks and quite simply, to make these risks bankable. This is how we plan to continue paving the way at help Africa draw even greater levels of investments.”

In Kenya, these corporations have supported some of the country’s largest infrastructure projects including the Turkana wind power project and the soon-to-be-constructed Nairobi-Mombasa road expansion.

The Spring Meeting is fully supported by the Government of Kenya, which viewed it as an opportunity to showcase the country, and all of Africa, as a prime trade and investment destination. The Government had high-level representation at the meetings and hosted a welcome dinner for the 200 delegates.

This is the largest meeting the Berne Union has ever held in Africa. The African Trade Insurance Agency (ATI), successfully bid to host this year’s Annual Spring Meeting. The previous Spring meeting took place in Copenhagen, Denmark in 2017, and was hosted EKF, the Danish government’s export credit agency, under the auspices of their Minister of Finance.

Important Announcements Made During the Meeting:

1. The release of the industry’s 2017 statistics
The report is derived from an annual survey of the Berne Union’s members and their business along three distinct lines of business – insurers that support Short Term Credit; Medium to Long Term Credit; and Investment transactions.

Preliminary statistics indicate that, as a result of favourable growth in global trade and GDP in 2017, Berne Union members reported an uptick in new business in almost all areas. In contrast to mostly positive indicators, FDI flows in 2017 fell by nearly 16% due to a significant decrease of in-flows to developed markets, while “most developing markets retained similar levels of investment to 2016.”

The report also notes that the lack of FDI growth in developing countries (such as Kenya) “may indicate residual long-term uncertainty from investors, despite superficial confidence”, driven by concerns over political risks and policy issues “rather than any purely economic conditions.”

2. The launch of a USD1 Billion Renewable Energy Facility for sub-Saharan Africa
Senior representatives from the European Investment Bank and Munich Re today launch an important new facility that is backed by Germany and the EU as part of their commitment to backing the UN’s Sustainable Energy for All initiative.

To address the insurance gap in Africa, which is tied to an annual USD20 billion shortfall in energy infrastructure investments, a risk-sharing platform called the African Energy Guarantee Facility, or AEGF, was created. The aim is to boost investment insurance availability by providing up to USD1 billion in reinsurance capacity for African sustainable energy projects.

The African Trade Insurance Agency (ATI), in partnership with Munich Re and the European Investment Bank (EIB), will provide significant long-term investment insurance for sustainable energy projects. Products offered under AEGF will include insurance against sovereign or sub-sovereign non-payment and traditional political risk insurance perils like expropriation or currency inconvertibility.

The facility is expected to mobilise significant private financing in the form of debt and equity from banks and developers that are currently constrained to participate in the African energy sector. The programme should help start many new sustainable
energy projects on the continent.

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