WASHINGTON, CMC – The Inter-American Development Bank (IDB) says it has completed a risk-transfer transaction using credit insurance protection with private insurance companies to help diversify its portfolio and free up capital for additional lending to Latin America and the Caribbean.
The Washington-based financial institution said previously it pioneered credit-substitution transactions and guarantees with other multilateral development banks (MDBs) and governments. This is the first such transaction with the private sector.
Credit insurance protects US$300 million of exposure on the IDB balance sheet, releasing capital that can be leveraged three to four times to increase development financing and continue improving lives in borrowing member countries. It said the transaction is distributed across 14 insurance companies in the United States, Asia, and Europe.
“This credit-risk-insurance transaction is an example of the strategies for capital efficiency and innovative solutions in capital markets that the IDB uses to maximize lending capacity and implement the recommendations of the G20-sponsored Independent Review of MDBs’ Capital Adequacy Frameworks. ”
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