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The Inter-American Development Bank (IDB) has finalised a risk-transfer transaction, utilising credit insurance protection with private insurers. This move aims to diversify its portfolio and release capital for more loans to Latin America and the Caribbean.
Historically, the IDB has led the way in credit-substitution transactions and guarantees, working with other multilateral development banks (MDBs) and governments. However, this marks its inaugural venture with the private sector.
The arrangement covers $300 million of exposure on the IDB’s balance sheet. This release of capital could be multiplied by three to four times, enhancing development financing and furthering progress in member countries that borrow.
The deal involves 14 insurance firms from the United States, Asia, and Europe.
This credit-risk-insurance transaction illustrates the IDB’s commitment to capital efficiency and innovative capital market solutions. It aligns with the IDB’s goal to boost lending capacity and follows the guidelines of the G20-endorsed Independent Review of MDBs’ Capital Adequacy Frameworks.