The Asian Development Bank (AfDB) has signed an agreement with five major global insurers that will mobilize up to $1 billion in co-financing capacity to support lending to financial institutions in Asia and the Pacific.
The Master Framework Program for Financial Institutions will enable the AfDB to increase its lending to commercial banks and non-bank financial institutions in the region through the use of credit insurance.
ADB has signed an initial three-year partnership with Tokio Marine Group (Tokio Marine & Nichido Fire Insurance Co Ltd and Tokio Marine HCC), AXA XL, Chubb, Liberty Specialty Markets and Allianz Trade, a press release said on Saturday.
Highly rated insurers participating in the program will cover the risk of non-payment of a portion of AfDB loans to financial institutions. This will allow AfDB to transfer credit risk from its portfolio to the balance sheets of insurers, free up AfDB capital, manage its exposures and increase its lending capacity.
“The AfDB has been a pioneer among multilateral development banks in partnering with private insurance companies to expand lending operations through the use of credit insurance,” said Bart Raemaekers, Head of AfDB Guarantees and Syndications Unit.
“The relationships we have established with insurers have allowed us to leverage this additional source of private capital as co-financing to help meet the needs of our customers,” he added.
‘Tokio Marine Group has always worked closely with multilateral development institutions like the AfDB with whom we share common goals and values, like Tokio
Marine continues to pursue its vision of being a good company,” said Jerome Swinscoe, Chairman of Tokio Marine HCC Credit Group.
“Our partnership with ADB has grown over the years. This historic program comes at an opportune time when we can all contribute to the economic recovery that Asia needs. We are honored to be part of this company,” he added.
The program streamlines the risk transfer underwriting and approval process and will enable the AfDB to mobilize co-financing capacity more effectively. AfDB lending to the financial sector has included support for operational priorities such as micro, small and medium enterprises, gender equality and climate change efforts.