The Inter-American Development Bank (IDB) has completed a risk-transfer transaction using credit insurance protection with private insurers, in an effort to help diversify its portfolio and free up capital for additional lending to both Latin America and the Caribbean.
The credit insurance protects $300 million of exposure on the IDB balance sheet and releases capital that can be leveraged three to four times.
This will help in increasing development financing and continue improving lives in borrowing member countries.
The transaction is distributed across 14 insurance companies in the United States, Asia, and Europe.
This is the bank’s first such transaction with the private sector.
Previously, it pioneered credit-substitution transactions and guarantees with other multilateral development banks (MDBs) and governments.
IDB is a source of long-term financing for economic, social and institutional development in Latin America and the Caribbean.
This credit-risk-insurance transaction is one of the strategies that the IDB is using to maximize lending capacity and implement the recommendations of the G20-sponsored Independent Review of MDBs’ Capital Adequacy Frameworks.
The transaction aims to allow for capital efficiency and innovative solutions in capital markets.
