Overall, MIGA has been given broader scope to determine eligibility for investments that meet the core requirements of the agency: the project being supported through a MIGA guarantee must be financially and economically viable, environmentally sound, and consistent with the development objectives of the host country.
A key modification is that MIGA is now able to insure project debt even if the agency is not insuring a portion of the equity investment. “This is crucial for lenders,” says MIGA’s Executive Vice President Izumi Kobayashi. “In the past, because we were unable to cover stand-alone debt, we had to turn away business when lenders were concerned about project risk, but the equity investor was not eligible or interested in purchasing coverage. This has meant that there have been cases where prospective lenders to projects have chosen not to proceed, resulting in increased transaction and borrowing costs for the sponsors, which has negatively affected project performance and development impact.”
In addition, MIGA can now provide political risk insurance to new foreign investors in cases of the simple acquisition of existing investments. Previously, the agency was unable to provide cover for brownfield acquisitions, despite the potential developmental benefits of having a new private sector operator. MIGA will also be able to insure eligible investments in cases where an investor is seeking coverage for a pool of existing and new projects.
The convention changes also encompass simplification of procedures, including the guarantee application process, to address client feedback and improve the agency’s efficiency. “These changes significantly enhance MIGA’s development impact and our ability to deliver on our mission of encouraging foreign direct investment that improves people’s lives,” says Kobayashi. “I’m grateful for the support of our members and look forward to supporting more investments that will benefit from MIGA’s risk-mitigation instruments.”