The Overseas Private Investment Corp. (OPIC) has arranged new political risk insurance for private equity fund investments in emerging markets.
OPIC, the U.S. government’s development finance institution, sees investor prospect growing much faster in the emerging markets than developed markets now. This product will offer coverage for these challenging regions, including the Middle East and Africa.
Because of the tremendous risk involved with doing business in these politically unstable countries, this kind of insurance has traditionally been very expensive.
“Having pioneered the development of both political risk insurance and debt facilities for private equity investment, OPIC is in a unique position to launch new, flexible and cost-effective facilities that we expect will facilitate new investment in emerging markets,” said Elizabeth Littlefield, OPIC’s president and CEO.
OPIC-supported PRI facilities also will help accelerate capital-raising cycles for investment funds by providing fund managers and their partners with long-term coverage against the risk of losses to their investments which may be caused by expropriation, currency inconvertibility, and political violence.
The new facilities will enable OPIC to arrange political risk insurance for all individual investments for all of a fund’s investors or the specific investment amounts of a select group of investors in a fund. The insurance facilities are available either through direct OPIC insurance or through an OPIC-sponsored private insurer reinsured by OPIC.
Coverage can include protection for damage caused by political violence and for losses due to unlawful acts. For example, OPIC is developing insurance products for the renewable resources sector, specifically to protect investors against a government’s change in the feed-in tariff that the investor has relied upon to structure its project. It will also cover things such as investment in forestry projects, including Reducing Emissions from Deforestation and Forest Degradation projects.
Coverage will be available to prospective candidates responding to the agency’s global engagement call for proposals, issued in November. As one of the agency’s most flexible calls ever, the initiative is intended to result in at least $400 million in OPIC financing for sustainable development globally.