Press Releases

ATI expands into bonds supporting the region’s largest insurer in a deal valued at $34 million

NAIROBI, 30 May 2013 – In an effort to respond to a gap in the insurance industry, the African Trade Insurance Agency (ATI) recently started offering reinsurance cover on surety bonds. Since launching the product in late 2012, the pan African political and credit risk insurer signed its largest deal in January to reinsure a portion of a portfolio valued at $34 million (Ksh3 billion). The contract provides reinsurance to the largest insurer in East Africa on their entire bond portfolio.

Surety bonds are an important aspect of most construction and freight forwarding transactions. The increasing volume of construction projects in the region has outpaced the capacity of banks and insurance companies to issue or carry bonds.

The challenge of constrained capacity in the market is just the situation that regional governments created ATI to support in 2001. After stepping in five years ago to help local insurers extend cover to their policyholders against damage caused by political violence, ATI is once again taking the lead – this time to support infrastructure development in its member countries.

Jef Vincent, ATI’s Chief Underwriting Officer, who is spearheading the initiative notes “we took a decision to lend support to banks and insurers in this product segment after conducting extensive market research and speaking with our partners. What we found is a fairly substantial demand that ATI can readily fill. It’s a good fit for us because this new cover gives ATI another avenue of increasing insurance capacity, which also satisfies a core mandate – to help improve the business climate in our markets.”

The deal covers a range of bonds insured by a regional insurer in Burundi, DR Congo, Kenya, Madagascar, Rwanda, Tanzania and Uganda. Under the terms of the contract, ATI will cover these types of bonds and associated risks:

Bid bond: the possibility that a contractor may withdraw the bid before the deadline or after the contract has been awarded
Advance payment bond: failure of the contractor to refund the project owner’s advance payment issued to initiate the work
Performance bonds: if the contractor fails to complete the work to the specifications outlined in the tender documents
Maintenance bonds: the risk that after completion of the work, the contractor fails to do maintenance work as outlined in the contract
Retention bond: the risk that the contractor fails to refund payment received by the beneficiary before the date for payment or release as outlined in the contract
Customs bonds, including Transit bonds: the risk that the contractor fails to pay customs taxes or to obey other regulations relating to payments on revenue

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About The African Trade Insurance Agency
ATI was founded in 2001 by African States to cover the trade and investment risks of companies doing business in Africa. ATI provides Political Risk, Surety Bonds, Trade Credit Insurance and Political Violence and Terrorism & Sabotage cover. To date, ATI has supported over US$7.5 billion in trade and investments across Africa in sectors such as agribusiness, energy, exports, housing, infrastructure manufacturing, mining and telecommunications. ATI is the highest rated insurer in Africa with the 2012 renewal of its Long Term ‘A/Stable’ rating for Financial Strength and Counterparty Credit by Standard & Poor’s.