About MIGA
MIGA is a member of the World Bank Group. MIGA’s mandate is to promote cross-border investment in developing countries by providing guarantees (political risk insurance and credit enhancement) to investors and lenders.
Services
MIGA provides political risk insurance guarantees and credit enhancement to private sector investors and lenders. MIGA’s guarantees protect investments against non-commercial risks and can help investors obtain access financing on improved terms and conditions. Political Risk Insurance products include:
- WAR AND CIVIL DISTURBANCE. Protection against loss from, damage to, or disappearance of tangible assets caused by political acts of war or civil disturbance.
- BREACH OF CONTRACT coverage provides protection against losses arising from a government’s breach or repudiation of a contract with an investor.
- CURRENCY INCONVERTIBILITY AND TRANSFER RESTRICTION. Protection against losses arising from an inability to legally convert local currency into hard currency.
- EXPROPRIATION. Protection against losses arising from certain government actions that may reduce ownership of the insured investment.
MIGA’s War and Civil Disturbance coverage provides protection against loss from, damage to, or the destruction or disappearance of, tangible assets or total business interruption (the total inability to conduct operations essential to a project’s overall financial viability) caused by politically motivated acts of war or civil disturbance in the country, including revolution, insurrection, coups d’état, sabotage, and terrorism.
For tangible asset losses, MIGA pays the investor’s share of the lesser of the replacement cost and the cost of repair of the damaged or lost assets, or the book value of such assets if they are neither being replaced nor repaired. For total business interruption that results from a covered war and civil disturbance event, compensation is based, in the case of equity investments, on the net book value of the insured investment or, in the case of loans, the insured portion of the principal and interest payment in default. This coverage encompasses not only violence in the host country directed against a host country government, but also against foreign governments or foreign investments, including the investor’s government or nationality.
Temporary business interruption may also be included upon a request from the investor and would cover a temporary but complete cessation of operations due to loss of assets or unreasonably hazardous conditions in the host country, which result in a temporary abandonment or denial of use. For short-term business interruption, MIGA pays unavoidable continuing expenses and extraordinary expenses associated with the restart of operations and lost business income or, in the case of loans, missed payments.
Other MIGA’s products:
- MIGA’s CAPITAL OPTIMIZATION product is designed for global retail banks with significant exposures to central banks in emerging markets. MIGA can insure mandatory reserves held by a parent bank’s emerging-market subsidiaries, which reduces the counterparty risk and can lead to a reduction in the bank’s risk-weighted assets (RWA) on a consolidated basis. The RWA capacity that is freed up can then be used to grow the bank’s loan book.
- MIGA’s SMALL INVESTMENT PROGRAM (SIP) is designed to facilitate investments into small and medium-size enterprises involved in the finance, agribusiness, manufacturing, and services sectors. The program offers a streamlined approval process, allowing investors to get MIGA coverage in place quickly.
- MIGA offers a solution to these issues by providing its GUARANTEE COVERAGE TO PRIVATE EQUITY FUNDS that meet MIGA’s eligibility criteria and commit to MIGA’s environmental, social, and anti corruption policies. Those funds are offered a master contract of guarantee that reserves MIGA capacity and provides up-front pricing to the General Partners of the fund for a specific period (two to three years). The fund managers may use this contract to raise funds from institutional investors who are interested in taking the commercial risks (and returns) associated with these investments. MIGA then provides political risk insurance to each underlying investment using MIGA’s regular underwriting process.
MIGA covers capital and debt insurance up to 90%.
October 24, 2022, The Head of the Government of Ukraine has noted that Ukraine is working to minimize military risks for investors. In particular, there has been established cooperation with the MIGA. MIGA has had successful cases in countries that were facing terror attacks. The Agency has disbursed $30 million to Ukraine for the implementation of a pilot project on investment insurance.
November 17, 2022, Raiffeisen Bank International AG has applied for MIGA’s guarantee of up to €50 million in Expropriation of Funds cover for mandatory cash reserves for a period of up to one year and one day into its subsidiary JSC Raiffeisen Bank in Ukraine.
February 23, 2023, MIGA has provided an indicative proposal for a pilot project of political military risk insurance at the expense of their authorized capital. However, MIGA stopped processing applications due to the lack of reinsurance opportunities.
Although MIGA products can cover risks for international investors, this mechanism is not available to Ukrainian companies.
March 8, 2023, MIGA has launched a trust fund to Support to Ukraine’s Reconstruction and Economy Trust Fund. The fund, SURE, is a new initiative to solve humanitarian problems and support economic activity and recovery in Ukraine. The first $23 million has been provided by Japan. MIGA expects the fund to grow to $300 million with contributions from additional donors. This would allow the agency to provide trade finance guarantees and ensure bank reserves during conflict and political risk to support Ukraine’s post-war recovery.
In the immediate term during the ongoing war, MIGA will:
- provide trade finance guarantees and short-term loan capacity for imports of essential goods, working in partnership with IFC and EBRD;
- support liquidity and working capital for small and medium-sized enterprises in agribusiness, fuel, food, health, and logistics through PRI guarantees to international banks with branches in Ukraine;
- provide PRI selectively for real sector projects.
Following stabilization of conflict either entirely or in parts of Ukraine, MIGA will provide political risk insurance to international lenders and sponsors for reconstruction efforts in critical sectors including transport, housing, and energy.
Sources
Multilateral Investment Guarantee Agency. (n.d.). Products. World Bank Group.
