NAIROBI, 11 March 2011 – In a move that will help exporters and investors doing more business in the Muslim world and the African continent amidst the ongoing turmoil, two established insurers have joined forces to strengthen their reinsurance cooperation. The Islamic Cooperation for the Insurance of Investment and Export Credit (ICIEC) and the African Trade Insurance Agency (ATI) signed a strengthened Memorandum of Understanding (MOU) today that aims to provide greater reinsurance support on projects that benefit exporters and investors conducting business in a member country belonging to either institution. Dr. Abdul Rahman Taha, CEO of ICIEC and George Otieno, CEO of ATI signed the document.
The Agreement arrives on the heels of unprecedented political instability in the MENA region which has prompted experts to reassess the region’s risk profile, and accordingly we are expecting an increase in premium in the near future to reflect this increased risks. The demand for political risk insurance has also surged in light of increased debt protection costs and yields on government debt across the Gulf region.
“As our mandate is to encourage exports from its member countries, ICIEC has insured USD 3.5 Billion trade volume in favour of our Arab and African member countries, since the inception of the Corporation in 1995”, commented Dr Taha, ICIEC’s CEO.
Both ICIEC and ATI are among the strongest rated financial institutions in their respective regions. ICIEC is rated Aa3 by Moody’s while ATI has a Long term A rating from S&P ranking it the second highest institution in Africa after the African Development Bank. This, along with a combined capital base of $356 million will help ease the impact of the recent political upheaval that has seen governments in Tunisia and Egypt topple with others such as Libya and Yemen on the brink of collapse.
“The events in the Middle East and North Africa have shown how quickly countries rated as relatively stable can become high risk. ATI welcomes this partnership with ICIEC that will strengthen insurance protection for African traders who are already trading with Arab countries as well as those who may be seeking opportunities in that region over the coming months,” commented Mr. Otieno, ATI’s CEO.
With GDP growth rates that outpace the global average, the MENA region and Africa are among the fastest growing regions in the world. Both regions have undergone a renaissance in recent months which is also reflected in rising trade volumes. Trade between Arab member countries of the Gulf Cooperation Council and Africa has grown by 170 percent in the last 10 years (2000 – 2009) from $6.8 billion to $18.1 billion – hitting a record $25.7 billion in 2008.
Under the terms of the MOU both institutions will reinsure each other on projects supporting their respective member countries. They will also explore the possibility of formalising a Debt Collection Agreement in order to collaborate on collections or recover claims. Both institutions offer protection to investors with political risk insurance products and for exporters with export or trade credit insurance that covers an agreed percentage of an invoice or receivables that remain unpaid as a result of protracted default, insolvency or bankruptcy.
