Since 1997, MIGA has successfully used reinsurance to
leverage its investment guarantee capacity, manage the risk profile of its
portfolio and foster the growth of the private political risk insurance market.
Significant benefits have accrued both to MIGA's investors, who have gained
access to larger levels of coverage for projects in developing countries, and to
the host countries that have benefited from much higher levels of productive
Syndication/ceding risk - Whenever a
project exceeds MIGA's own capacity, the agency reinsures itself, through a
syndication process, with private and public sector (re)insurance companies in
order to meet its clients’ needs. MIGA’s main programs are facultative
reinsurance and the cooperative underwriting program (CUP).
Assuming risk - In addition to
attracting capacity from private and public insurers in order to support
projects in its member countries, MIGA also provides such capacity to primary
insurers. Currently MIGA provides this kind of assistance mainly to public
insurers, but also welcomes inquiries from private insurers. MIGA's ability to
provide reinsurance is conditioned on, among other factors, whether the agency's
environmental and social policy clauses can be included in the contract of the
MIGA's reinsurance partners changes over time, as new members
are added and some companies withdraw from the market.
When MIGA sets out to attract additional insurance
capacity through facultative reinsurance (FACRE) or the Cooperative Underwriting
Program (CUP), it takes the following steps:
- Preliminary discussions with a number of potential
(re)insurers take place on a no-name basis. MIGA informs the client on
indicative available capacity and premium rates. The client authorizes MIGA to
seek capacity with the FACRE or CUP program through a mandate letter and pays
applicable syndication fees.
- MIGA sends out formal invitations to potential
- Reinsurers/ CUP-partners indicate to MIGA the capacity
they wish to offer and agree to basic terms and conditions.
- In the case of facultative reinsurance, the selection of
partners is made by MIGA. In case of CUP, the selection of CUP-partners is a
joint decision by MIGA and the client.
- Syndicate is formed and participating reinsurers/
CUP-partners are informed.
- Underwriting package and transaction documentation are
sent to syndicate members for their review.
- Signing of the Contract of Reinsurance and the Contract
of Guarantee, or signing of the CUP.