New OPIC Political Risk Insurance Will Cover Investments by Private Equity Funds
December 16, 2011
(OPIC)
WASHINGTON, D.C. – Private equity fund investments in emerging markets, where
investor prospects are growing far more rapidly than in developed markets, can
now be protected by political risk insurance (PRI) arranged by the Overseas
Private Investment Corporation (OPIC), the U.S. Government’s development finance
institution.
The new OPIC insurance facilities stand to provide important protection for
investors in challenging markets such as the Middle East and Africa, where
investment is most urgently needed and where political uncertainty has obscured
the fact that those markets typically generate lucrative rates of return.
In addition, OPIC-supported PRI facilities will help to accelerate
capital-raising cycles for investment funds by providing fund managers and their
limited partners with long-term coverage against the risk of losses to their
investments which may be caused by expropriation, currency inconvertibility, and
political violence. PRI coverage can significantly mitigate the risks posed to
emerging market private equity investors, and thereby increase their appetite to
pursue the opportunities available in the developing world.
“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 OPIC President and CEO Elizabeth
Littlefield.
“OPIC’s new PRI facilities will enable fund managers to offer the private equity
community precisely the tailored risk mitigation their investors want,” Ms.
Littlefield said. “And given the volume, diversity, and spread of risk inherent
in fund programs, OPIC can provide such facilities together with private market
insurers at more affordable rates than comparable stand-alone insurance products
that are currently available.”
The new facilities will enable OPIC to arrange PRI for either all individual
investments for all of a fund’s investors, or the specific investment amounts of
a select group of investors in a fund. PRI facilities are available either
through direct OPIC insurance or through an OPIC-sponsored private insurer
reinsured by OPIC and backed by the U.S. government’s Full Faith and Credit AAA
rating.
The coverage provided can be as broad or as narrow as needed and may 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; and to cover investment in forestry projects, including
Reducing Emissions from Deforestation and Forest Degradation (REDD) projects.
OPIC is making the new insurance facilities available to prospective candidates
responding to the agency’s Global
Engagement Call for proposals, issued in November. One of the agency’s
broadest, most flexible calls ever, the initiative is intended to result in at
least $400 million in OPIC financing for sustainable development globally,
catalyzing hundreds of millions more in private sector investment.
Click here for an OPIC fact sheet detailing the new PRI facilities
for private equity investment funds.
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