Sovereign Risk provides private political risk insurance
A Bermudian-based re/insurer has played a prominent role in the world’s largest debt-for-nature restructuring project focusing on marine conservation.
Sovereign Risk Insurance Limited, a Chubb company, which is based on the island, and Chubb Global Markets supported US International Development Finance Corporation’s participation in a landmark debt restructuring and ocean conservation project in the Central American country of Belize.
The two companies, together with other private insurers, provided $300 million of reinsurance to DFC in an innovative political risk insurance transaction designed to help Belize reduce its external government debt and fund marine protection.
Chubb said the insured transaction, a $364 million loan structured and arranged by The Nature Conservancy and Credit Suisse, would enable the country to reduce its debt burden by approximately $250 million and generate an estimated $180 million for marine conservation over 20 years.
DFC provided approximately $610 million of political risk insurance, covering loan principal and interest, to support the transaction, thereby assuring the loan achieved an investment grade rating.
Due to the significant size of DFC’s exposure, private political risk reinsurance support was a critical component of the transaction, Chubb said.
DFC’s support for this project represents one of the most innovative examples of climate finance and a model for the future, Chubb said, because it reduced Belize's indebtedness, generated investments in marine and biodiversity protection and promoted climate resilience in the country’s “blue” economy.
With this loan, Belize is able to repurchase and retire a substantial portion of its external commercial debt, create significant annual cashflow for marine conservation through 2040, and establish an endowment to fund marine conservation for future generations.
This transaction represented the world’s largest debt-for-nature restructuring focusing on marine conservation to date, Chubb added, and was the second transaction for TNC’s “Blue Bonds for Ocean Conservation” programme.
Price Lowenstein, president of Sovereign Risk, said: “The private political risk insurance market is delighted that we could support the DFC in such a meaningful way on this groundbreaking transaction.
“This is an excellent example of public-private partnership that can serve as a template for future ‘blue’ debt financing.”
He added: “Not only are we helping to make a remarkable conservation project possible but we are also supporting sustainable economic development and community resilience through critical debt relief.”