Frequently Asked Questions
Below we’ve answered some common questions for those in search of more information about MIGA and how we operate.
Investment Guarantee Basics
MIGA provides non-commercial guarantees (insurance) for cross-border investments into developing countries. MIGA's guarantees protect investors against the risks of transfer restriction (including inconvertibility), expropriation, war and civil disturbance, breach of contract, and non-honoring of financial obligations.
In general, investors who are citizens of, or entities that are incorporated in, MIGA member countries—other than the country in which the investment is being made (called host country)—are eligible for MIGA guarantees. However, MIGA can insure an investment made by a national of a host country if the funds to be invested come from outside the country and the application for coverage is made jointly by the investor and the host country.
MIGA issues guarantees for periods of up to 15 years, and occasionally, 20 years. The minimum length of a guarantee is three years. In guarantees that cover loans, MIGA usually issues coverage to match the length of such loans.
Yes, if the investor breaches its contractual obligations.
Yes, after the first three years of coverage, or as of the date of notice when the project enterprise is liquidated, declared bankrupt, or placed on receivership, or the guarantee holder has no legal interest in the guaranteed project.
No, MIGA is an insurer, not a lender.
No, MIGA covers only equity interests, loans related to an investment project (shareholder and non-shareholder loans), and certain types of transactions in which the investor's remuneration depends on the revenues or production of the investment project.
Yes, prior to consideration by MIGA's Board of Directors, MIGA discloses on its website a "Summary of Proposed Guarantee" that includes the name of the investor, the host country, a brief project description, the risks covered, and the amounts to be insured. Proprietary information is not disclosed without the investor's approval. Environmental and social information is also disclosed for all projects with any potentially adverse social or environmental impacts. After MIGA signs a contract of guarantee with an investor, MIGA discloses a "Project Brief" containing final details of the investment. Project briefs are also published in MIGA's annual report.
MIGA insures cross-border investments. This includes new investments as well as investments associated with the expansion, modernization, improvement, or enhancement of existing projects, or where the investor demonstrates both the development benefits of, and a long-term commitment to, the project. Acquisitions by new investors, including the privatization of state-owned enterprises, may also be eligible. Projects must support the host country's development goals, comply with MIGA's Policy on Social and Environmental Sustainability and anti-corruption and fraud standards, and also be financially viable.
Forms of eligible investments include equity interests, shareholder and non-shareholder loans, loan guarantees, as well as certain types of transactions in which the remuneration of the investor largely depends on the revenues or production of the investment project (e.g., technical assistance contracts, management contracts, operating leases, profit sharing contracts, and franchising agreements).
Most sectors are eligible for MIGA guarantees, including (but not limited to) financial, infrastructure, oil and gas, mining, telecommunications, services, agribusiness, and manufacturing. For examples of projects recently covered by MIGA please search our project database.
Sectors not eligible for coverage include gambling, tobacco production and processing, highly speculative investments, defense, illegal drugs, and the production of spirits.
MIGA can cover loans made by a third-party lender as long as the loan relates to a specific investment or project in which some other form of direct investment is present.
In addition to country risks, MIGA considers project risks, including location, project viability, the sector and its importance for the host country, financial viability, potential for earning export proceeds in freely usable currency, environmental impact, and participation of local partners as well as domestic and multilateral institutions.
Yes, MIGA may on occasion offer standalone coverage except in its Small Investment Program which offers a standardized package of risk coverages.
No, MIGA provides insurance against non-commercial risks only.
Regardless of the nature of the project, an investor is required to remain at risk for a portion of any loss. For equity investments, MIGA may guarantee up to 90 percent of the investment, plus up to an additional 500 percent of the investment contribution to cover earnings attributable to the investment. For loans and loan guarantees, MIGA may guarantee up to 95 percent of the principal, plus an additional 135 percent of the principal to cover interest that accrues over the term of the loan. For technical assistance contracts and other contractual agreements, MIGA may insure up to 90 percent of the total value or remuneration of payments due under the insured agreement (up to 95 percent in exceptional circumstances).
Project and Country Limits
Yes, MIGA currently has a limit of $720 million per country on a net basis. However, MIGA works closely with public and private insurers, using, for example, treaty and facultativereinsurance as well as coinsurance to augment its capacity limits.
There is no minimum size limit for a project. At present, MIGA can cover up to $220 million on a net basis per project. This may be supplemented through MIGA's coinsurance and reinsurance programs, therefore the gross amounts covered can be considerably higher.
Applying for a MIGA Guarantee
The investor should submit a Preliminary Application as soon as possible, generally before substantial funds are committed and expended for the project.
Applicants first submit a confidential, two-page Preliminary Application. MIGA staff determine within three business days whether a project is in principle eligible for coverage; they register the project and send the applicant a letter confirming such registration along with a Definitive Application, in which the applicant is requested to provide more detailed information.
Depending on the project's complexity, MIGA typically issues guarantees within three to four months of receiving a Definitive Application.
While there is no charge for filing a Preliminary Application, MIGA does charge a fee to register Definitive Applications. If a guarantee is offered and accepted, the fee is credited toward the first premium payment. If MIGA declines to offer coverage, the fee is refunded. If the investor decides not to purchase the coverage, MIGA retains the fee. MIGA may charge an additional processing fee for particularly complex projects and a syndication fee for arranging additional amount of coverage under its coinsurance and reinsurance programs.
Cooperation between MIGA and Other Public and Private Insurers
Yes, MIGA works very closely with both public and private insurers. There are several ways in which such cooperation is achieved: treaty and facultative reinsurance, the Cooperative Underwriting Program, and coinsurance.
The CUP is a coinsurance program designed to encourage private insurers to cover political risk insurance for projects alongside MIGA. Under the CUP, MIGA is the insurer-of-record and issues a contract of guarantee for the amount of insurance requested by an investor (subject to available capacity), but retains only a portion of the amount for its own account.
Yes, MIGA uses both treaty and facultative reinsurance to augment its capacity limits. Reinsurance is obtained from both private and public insurers.
Yes. MIGA can provide reinsurance; however, the primary insurer's contract must contain certain provisions required by MIGA, such as those concerning MIGA's Policy on Social and Environmental Sustainability
MIGA & the World Bank Group
We are legally and financially independent, but cooperate closely with the International Bank for Reconstruction and Development, the International Development Association, the International Finance Corporation, and the International Centre for Settlement of Investment Disputes.
One of the main differences is that the World Bank requires a counter-guarantee of the host government; also, the World Bank only insures debt instruments, while MIGA covers equity as well. For details, see the World Bank Guarantee Instruments website. Although MIGA does not require a counter-guarantee, it does request host country approval before issuing a guarantee.
No, MIGA can insure investments in projects with or without the involvement of another member of the World Bank Group.
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MIGA has paid ten claims since its inception in 1988. The first claim was in 2000 for an equity investment in P.T. East Java Power Corporation in Indonesia. The project was one of several power projects suspended by a presidential decree in 1997 in response to the country's economic crisis in the late 1990s. The second claim was for war and civil disturbance relating to a power project in Nepal. MIGA paid compensation for the repair of the damages to the gas turbine, and the project continues to be in operation. The third claim was for a project in Argentina at the time of the country's financial crisis. The fourth and fifth claims were paid in fiscal year 2009 and were both related to losses under war and civil disturbance coverage. One was paid for losses incurred in the violence following Kenya's disputed election in 2007 and the other was paid for losses resulting from political violence in Madagascar. In 2011, a small claim for war and civil disturbance was paid from the donor-funded Afghanistan Investment Guarantee Facility. In fiscal 2015 MIGA paid three claims for losses incurred from war and civil disturbance events, in Burkina Faso, Central African Republic, and Mali.
The small number of claims paid by MIGA since its inception in 1988 attests to the agency's ability to work with investors and host countries to find amicable resolutions to disputes. MIGA focuses on finding solutions to pre-claim situations before they reach the level of full-fledged claim, ultimately keeping the investment and its development benefits on track. MIGA's proactive facilitation efforts have been pivotal in the resolution of more than 90 disputes related to MIGA-guaranteed projects.