Export Credit Agencies
An important part of Sovereign’s business involves supporting national Export Credit Agencies (ECAs). This support takes the form of both facultative (single risk) reinsurance as well as treaty reinsurance. Sovereign can provide ECAs with reinsurance support for tenors of up to 15 years and amounts of up to $80 million per transaction.
Sovereign can also coinsure with official agencies (and other private insurers) in order to increase available amounts of insurance for large projects. By sharing risk through reinsurance, Sovereign’s ECA clients are able to better balance their portfolios and continue offering coverage in countries of particularly heavy concentration. ECAs can reinsure existing exposures or new exposures and can cover either debt or equity. Sovereign’s unique structure and financial strength enables us to provide customized solutions to public agencies, which often have unique needs.
To date, Sovereign has concluded over 85 co-insurance and reinsurance transactions with eleven different ECAs, including: CESCE (Spain); COFACE (France); EDC (Canada); EFIC (Australia); EKF (Denmark); EKN (Sweden); Finnvera (Finland); ONDD (Belgium); SACE (Italy); ASHRA (Israel) and OPIC (U.S.). Sovereign has also co- and reinsured with the World Bank’s political risk insurance agency, MIGA.
Sovereign is a member of the Berne Union, the worldwide organization of national export credit and investment insurance agencies. Sovereign is honored to be a member of this prestigious organization and believes that membership in the Berne Union will further public-private cooperation in political risk insurance underwriting.
Some of our more notable transactions with these agencies over the past several years include:
- Sovereign provided reinsurance support for EDC (Export Development Canada) on the Veladero gold mining project in Argentina. In addition to their role as a direct lender, EDC provided a separate commercial banking syndication with $110 million in PRI coverage, which was a major factor in successfully attracting commercial bank financing to the project. Sovereign’s nine-year reinsurance contributed greatly to the amount of PRI capacity that EDC was able to make available to the commercial banks. This was by far the largest and longest tenor for an ECA/commercial bank and PRI-structured project finance transaction in Argentina since the country’s economic crisis in 2002. The project is located in the province of San Juan and involves Minera Argentina Gold (Magsa), a 100% owned subsidiary of Barrick Gold Corporation.
- Sovereign underwrote a ‘country-specific excess of loss’ reinsurance policy for Finnvera, the Finnish national export credit agency. Finnvera was seeking a solution to its high country risk concentrations in the Philippines, a key export market for Finland’s telecommunications manufacturers. Sovereign was able to design a $100 million excess of loss reinsurance solution which covers Finnvera for its exposure under a portfolio of insurance contracts issued to various commercial banks for their loans to two mobile phone operators in the Philippines. This reinsurance solution from Sovereign enabled Finnvera to continue supporting Finnish manufacturing exports to the Philippines.
- Sovereign completed a country-specific reinsurance treaty with COFACE, the French national export credit and investment insurance agency. COFACE was seeking to better balance its global portfolio by finding a risk sharing partner for COFACE’s largest single country exposure, which was in China. Most of COFACE’s exposure was in the form of investment insurance on French equity investments in China. Sovereign’s reinsurance support provided up to $70 million of capacity to COFACE for a 10-year tenor. This reinsurance treaty enabled COFACE to transfer exposures from its largest single country of concentration and achieve a more evenly balanced global portfolio.