1. Political Risk & Credit Risk Insurance: The Next Frontier for African Reinsurers? 6 October, th African Reinsurance Forum: Nairobi, Kenya Humphrey Mwangi Acting Chief Underwriting Officer African Trade Insurance Agency (ATI)

2. Objectives of Presentation
Part 1
PRI and CRI Defined
The Market
Political Risk Insurance (PRI) in Detail
Case Example
Part 2
Credit Risk Insurance (CRI) in Detail
Background to ATI
ATI and Reinsurance 2

3. What is Political Risk Insurance (PRI)?
Insurance against losses resulting from actions/inactions of governments
Usually exclusions under normal insurance
PRI risks are often outside the control of the parties to a project
Taken out by exporters and cross-border investors & lenders

4. What risks does it cover?
Risks to cross border investment
Expropriation, selective discrimination, forced divestiture, creeping expropriation, breaching investment agreements or guarantees, nationalisation, embargo and sanctions
Risks to overseas assets
Deprivation, forced abandonment, sabotage and terrorism, war damage, confiscation

5. PRI cont’d Risks to international financing
Transfer & convertibility, political violence, expropriatory acts, non-honouring of government guarantees, breach of contract
Risks to finance programmes
Wrongful calling of bonds
Risks to contracts
Frustration, repudiation, embargo

6. PRI - Perception vs. Reality
Sovereign PRI Map 2008
Malawi = Iraq = Afghanistan = Somalia
South Africa = Botswana = Israel
AON PRI Map 2008
Kenya = Malawi = Iraq = Iran
Botswana = Somalia

7. The Market - players Multilaterals Official/National Agencies
ATI, MIGA, ICIEC
Official/National Agencies
OPIC, EDC, ECIC-SA, BECI
The Private Market
Chubb, Lloyds, Zurich, Sovereign

8. The Market - size PRI Capacity -2009
Confiscation, Expropriation, Nationalization
Contract Frustration
Lloyds
840,000,000
720,000,000
Private Insurers
477,500,000
380,750,000
TOTAL
1,237,500,000
1,040,750,000

9. Familiar PRI Events
Nationalization of oil companies in Southern America
Forceful seizure of farms in Southern Africa
cancellation of mining licenses in Central Africa

10. Case Example #1 East African Energy Project
Independent international energy producer sponsoring project to develop, transmit & distribute affordable electricity to rural and commercial end-users
Project needed Ministry of Finance guarantee in respect of Tariff Equalisation Facility to be viable but that was against IMF rules
Central Bank did not have the capacity to provide either a guarantee or a Letter of Credit to cover US$14.5 million worth of tariff reimbursements over three years
ATI provided a three and half year Non-Honouring of Sovereign Obligation Insurance Policy in partnership with Africa Re

11. Case Example #2 Political Violence XoL Treaty
Post-election violence in Kenya led many individuals and businesses to incur huge losses. Such losses were uninsured (exclusions)
ATI, working with leading local insurers, the Lloyds market, Africa-Re and Zep-Re, put together an XoL program
PV cover now available in Kenya and some East African countries

12. Case Example #3 ATI Reinsures MIGA
In 2008, a UK investor contracted with Kenya’s power distribution company to supply geothermal power to help alleviate the country’s perennial power shortages
MIGA a member of the World Bank Group, was approached by the investor to provide cover against the risk of Currency Transfer Restrictions, Expropriation and War & Civil Disturbance
ATI provided reinsurance to MIGA

13. End of Part 1
Q & A

14. Objectives of Presentation
Part 2
Credit Risk Insurance (CRI) in Detail
Background to ATI
ATI and Reinsurance
Case Examples
Benefits to Your Company 14

15. Credit Risk Insurance (CRI)
Insurance against non-payment
Insolvency
Protracted delay
Repudiation – refusal to pay
Conversion & transfer
War & related disturbances
Cancellation of import/export license

16. CRI Classified Whole Turnover CRI Single Obligor CRI Lenders All Risks
Private buyers
Public buyers
Lenders All Risks

17. Who Can Benefit From CRI?
Exporters
Importers
Banks
Contractors
Equipment suppliers
Service providers

18. Market Players Multilaterals e.g. ATI Export Credit Agencies e.g. CGIC
Exim-banks
Private insurers e.g. COFACE, Atradius, Euler-Hermes

19. CRI & the Economic Crisis
Banks’ low appetite for risk
Demand credit enhancement
Exporters/suppliers forced to provide financing – want CRI
Hard times in the west
- Exporters experiencing non-
payment
- Forced to sell on credit to stay in
business

20. Other Opportunities Resource growth e.g. oil & gas Telecoms sector
stimulating economic activity
Telecoms sector
- Supply of equipment, service
Regional integration
intra-regional trade
Reconstruction
Elections

21. Background to ATI African institution – by Africans 4 Africa Vision
“To transform Africa into a prime source and destination for trade and investment”
Mission
“To turn African risk into opportunity, through the provision of insurance and Financial products, in partnership with the private and public sector”

22. That means?
Mobilising public & private sector financial institutions to promote trade & investment in Africa
Using combination of private sector experience & capital, and public sector clout & connections

23. Why is ATI unique? Specialist insurer – Africa’s Lloyds?
Preferred Creditor Status
Deterrence Effect
Member states’ obligation to make ATI whole for any losses they cause
Member States’ stake in ATI enhances ATI’s abilities to avoid/minimize losses

24. ATI is the 2nd highest rated institution in Africa
ATI Credit Rating
ATI-ACA
ATI is the 2nd highest rated institution in Africa
Reassigned ‘A’ Stable Rating from Standard & Poor’s in June, 2009
for both:
 Counterparty Credit Rating
 Insurer Financial Strength rating
Country risk
Competition ?

25. Current Members Member countries Burundi Djibouti* D.R. Congo Eritrea*
Ghana*
Kenya
Liberia*
Madagascar
Malawi
Rwanda
Sudan*
Uganda
Tanzania
Zambia
Other members
Africa Re
Atradius
COMESA
PTA Bank
SACE
ZEP-RE
Interest from…
Angola, Egypt, Ethiopia, Mali, Mozambique, Nigeria, Senegal, Seychelles, Zimbabwe
 Open to all AU member states, non-African states, private corporations and other regional and international institutions  25

26. ATI & Reinsurance Objectives: ATI-ACA
Leverage ATI’s line size and country limits to support large projects
Encourage public and private risk sharing in Africa
ATI can both buy from and provide reinsurance
Country risk
Competition ?

27. ATI: Relationship with Reinsurers
ATI Reinsurance
ATI: Relationship with Reinsurers
Whole Turnover Trade Credit Insurance
Political Risk Insurance and Medium Term Credit Insurance
Quota Share Reinsurance Treaty.
60% Cession.
Facultative or Treaty Reinsurance as required.
Risk Retention no less than 10%
Reinsurers include: Lloyd’s of London Syndicates; Sovereign Risk (Bermuda); Zurich (USA); Chubb; and Africa Re
Atradius Re

28. ATI’s Main Terms Maximum tenor 10 years No minimum transaction size
Maximum line size (net exposure):
- Political Risk: US$7.5 million
- Credit Risk: US$3.75 million
Indemnity:
- Up to 100% (Political Risks)
- Up to 90% (Commercial Risks)
Price to risk. No subsidy to the private sector

29. Case Example #1 A Japanese Supplier in E. Africa
Japanese supplier of telecom equipment has made it policy to supply on credit only with insurance cover
ATI is providing comprehensive non-payment cover
ATI has sourced reinsurance support from Africa-Re and will approach Lloyds if higher exposure is requested
Japanese supplier takes comfort in ATI being on the ground, its S&P rating and strong reinsurers behind it

30. Case Example # 2 An Israeli Telecom in DRC
The telecommunications sector in the DRC has seen rapid growth in recent times, attracting many players into the scene
An Israeli company, working with a local partner, was keen to maintain market share and needed to invest in cellular base stations across the country
ATI was approached for cover and responded with its first Single-Obligor CRI policy to cover the contract in the even of payment default

31. Benefits to Your Company
Broad reach across Africa
Ability to attract more reinsurance capacity to Africa
ATI’s preferred creditor status & ‘A’ rating from S&P
Access to global partners like SACE, Africa Re, OPIC, AfDB, Atradius, MIGA, Lloyd’s
Added risk assessment expertise (global network)

32. End of Part 2
Q & A

33. ATI Contacts Humphrey.mwangi@ati-aca.org underwriting@ati-aca.org
Tel +254 (0) 33