MSIG and IFC Partner on Emerging Market Lending
MSIG USA and Mitsui Sumitomo Insurance of Japan announced a partnership with the International Finance Corporation (IFC). The collaboration involves a new insurance-backed credit facility designed to support expanded lending in emerging markets.
- This partnership is structured under the IFC's Managed Co-Lending Portfolio Program (MCPP), a platform that pools capital from institutional investors to co-lend alongside the IFC in emerging markets. Since its inception in 2013, the MCPP has raised over $19 billion from 18 partners. - The deal involves a $6 billion credit insurance policy, one of the largest of its kind arranged by a multilateral development institution. This policy acts as a credit risk mitigant, allowing the IFC to transfer a portion of its credit risk to MSIG and other insurers. - By transferring risk, the IFC enhances its own capital efficiency, which is expected to support up to $10 billion in new lending to commercial banks and other financial institutions in developing countries. This mechanism of using credit insurance allows the IFC to increase its lending capacity without requiring more capital from its government shareholders. - For MSIG, this arrangement provides a way to gain diversified exposure to a portfolio of emerging market loans that have undergone the IFC's due diligence and benefit from its preferred creditor status. This aligns with MSIG USA's specialization in political risk and trade credit insurance. - The structure operates on a "blind pool" basis, where MSIG and other participants agree on the eligibility criteria for loans upfront, and then capital is automatically allocated to qualifying loans originated by the IFC. This provides passive, yet priority, access to the IFC's deal pipeline. - The lending supported by this facility will target small and medium-sized enterprises (SMEs) and other growth sectors in emerging markets, with a focus on areas like climate finance, housing finance, and women-led businesses. - This collaboration is part of a broader trend of development finance institutions using credit and political risk insurance (CPRI) to mobilize private capital for developmental goals, bridging an estimated $50 billion annual gap in private sector engagement. - The deal is led by key executives including Daniel Riordan, Head of Political Risk and Trade Credit at MSIG USA, and Junichiro Mizukami, Managing Executive Officer at MSI Japan.
