AfDB explores multi-instrument approaches with insurers to support sovereign borrowings
The African Development Bank Group (AfDB) recently hosted an investor relationship event in London, bringing together representatives from over 30 insurance companies to discuss its balance sheet optimization and mobilization ambitions. The meeting, which took place on February 28th on the margins of the ExCred International conference, was attended by insurers from London, Bermuda, and other international markets, including several Lloyd’s Syndicates.
The purpose of the interactive session was to educate insurance market practitioners on the Bank Group’s mobilisation plans for 2023 and beyond, as well as to deepen its relationship with institutional investors by explaining its origination processes and risk management framework. Max Ndiaye, Acting Director of the Co-Financing, Syndications and Client Solutions department, highlighted the evolution of the Bank’s risk transfer activities and the importance of its preferred creditor status in maintaining the asset quality of its sovereign loan book. Ndiaye also spoke on the origination and approval process of new transactions.
The AfDB emphasized the benefits of its preferred credit status with respect to pricing and elaborated on the lack of sovereign defaults on its loans or credit enhanced facilities. The Bank’s focus on sustainable development finance goals was also highlighted, with Simon Bessant, Global Head of Insurance at The Texel Group, noting the importance of explaining these goals to institutional investors and encouraging their participation in projects that they may not normally be able to accommodate at a pricing that is palatable to AfDB borrowers.
Nana Spio-Garbrah, Acting Manager of the Client Solutions Division, commented on the Bank’s increased exploration of multi-instrument approaches with insurers through syndication and guarantees in support of sovereign borrowings in line with their newly adopted ESG Frameworks.
The G20 Capital Adequacy Framework Report has emphasized the need for increased private capital mobilization to achieve the UN Sustainable Development Goals and Agenda 2063, recommending the scaling up of risk transfer activities with multilateral development banks.
The AfDB has already concluded many balance sheet optimization and risk sharing structures with pools of private capital and/or unfunded credit protection providers, but it recognizes that regular dialogue will help strengthen its partnerships in this area. Notable transactions include the Room to Run Sovereign in October 2022, which featured participation from Axa, Axis, and HDI Specialty, following the success of the Bank’s innovative “Room to Run” (R2R) initiative.
With the mobilization of institutional investors, the AfDB aims to maximize the benefits of its landmark GCI-7 capitalization and further leverage its capital. The continued engagement with asset managers and institutional investors is expected to yield new risk-sharing structures that will support the Bank’s goals of sustainable development and economic growth in Africa.
