The Africa Finance Corporation (AFC) has launched a captive insurance company, which it says will expand its infrastructure financing across the continent.
Bermuda-based AFC Captive is backed by up to US$30mn in equity capital and will start by insuring AFC loans extended to its counterparties.
“This will enable the corporation to manage and retain risk more efficiently while reducing reliance on external commercial insurance markets over time,” the AFC said.
The new insurer will also allow the AFC to develop tailored risk-mitigation solutions for infrastructure investment.
Wola Asase, deputy director and head of syndications at AFC, will take on the additional role of heading up the wholly owned subsidiary and join its board.
AFC Captive is licensed as a Class 2 insurer by the Bermuda Monetary Authority, which means up to 20% of its underwriting capacity can be allocated to third parties.
The remaining capacity must be used to insure AFC-related risks.
The AFC flagged its own investment-grade credit profile, which includes an A3 long-term issuer rating from Moody’s, an ‘A’ long-term and ‘A-1’ short-term issuer credit rating from S&P Global, and an AAA domestic issuer rating from China Chengxin.
It added that AFC Captive will be looking to develop its own investment-grade credit profile as it grows.
AFC president and chief executive Samaila Zubairu said: “Africa’s infrastructure needs demand innovative approaches that allow us to mobilise more capital and extend financing capacity across the continent.
“AFC Captive is an important addition to our platform, enhancing our ability to manage risk, deploy capital more efficiently, and scale investment into the infrastructure and industrial projects that will drive long-term growth and economic transformation.”
Asase added that the new company “gives us greater flexibility in how we structure and support transactions across our portfolio”.
“By using insurance more strategically, we can expand market capacity, improve capital efficiency and unlock financing for projects that may otherwise be constrained by limited or costly external insurance.”
Earlier this year, Zubairu said global bank capital rules and outdated perceptions of African risk are continuing to discourage investment and inflate the cost of financing assets.
He argued that political risk and contract frustration insurance premiums did not reflect underlying levels of risk.
