Cash And Trade Magazine For Cash and Trade professionals in the Middle East
This year, as it celebrates two decades of outstanding success, ICIEC has designed a new strategy focusing more on investment insurance and project finance. But, at the same time, it will naturally continue to underwrite its export credit insurance business, which it sees as an essential part of its mandate to support the exports of its member countries
The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the export credit and investment risk insurance arm of the Islamic Development (IDB) Group, celebrates its 20th Anniversary this year.
For a multilateral organisation established on 1 August 1994 (24 Safar 1415H), the Corporation has come a long way in realising its vision of becoming “the internationally recognised leader in the provision of Shariah-compliant export credit and investment insurance and reinsurance in its member countries” and effecting its stated mission of providing such services to encourage intra-Islamic trade, especially exports, and to facilitate the flow of foreign direct investments (FDI) between member countries.
Currently, intra-Islamic trade constitutes some 18 per cent of the total trade of the 56-member Organisation of Islamic Cooperation (OIC) countries, and the aim is to increase that to 20 per cent by 2015.
Under the leadership of our Chairman of the Board, Dr Ahmed Mohamed Ali, and our Chief Executive Officer, Dr Abdel- Rahman El-Tayeb Taha, supported by a highly professional multinational staff, ICIEC has made tremendous strides in spreading the message of the importance of Shariah-compliant export credit and investment insurance through the provision of pioneering products and through educating the market, whose potential for such services runs into billions of dollars.
ICIEC, which is Aa3 rated by Moody’s, is the only Shariah compliant export credit and investment insurer in the world and is the leading insurer of credit and political risk in the MENA region. The Corporation has insured more than US$17 billion worth of exports since 1994 in the petrochemical, oil, textiles, food, agriculture, and infrastructure sectors.
To facilitate its continued expansion and reach, the Corporation’s Board of Governors in 2013 approved an increase in its authorised capital to 400 million Islamic Dinars (about USD 613 million). ICIEC’s total current subscribed capital is ID231.498 million (about USD 355 million) of which 110.860 million Dinars (about USD 170 million) is paid up.
The demonstrative effect of ICIEC’s impressive success and achievements over the last two decades despite volatile global economic conditions and an under-developed insurance culture in member countries per se is implicit.
The Corporation’s current membership comprises 42 shareholders, comprising the IDB and 41 countries, including 17 Arab countries, 15 African countries and nine Asian and other countries.
The impact of the Corporation’s products and services on the real economic and business development in member countries continues to grow. Business insured in 2013 (1434H) totalled US$3,362 billion compared with US$3,074 billion in 2012 (1433H).
Through our comprehensive product profile covering our Trade Credit Insurance Programme (TCIP); Foreign Investment Insurance Programme (FIIP); Reinsurance Programme and Technical and Advisory Services, we have made a real impact on companies and agencies in member countries to expand their exports and to facilitate intra-Islamic investment. These include Saudi Arabia, the UAE, Oman, Sudan, Turkey, Nigeria, Bangladesh to name but a few.
Our two trade credit products – Documentary Credit Insurance Policy (DCIP) and Bank Master Policy (BMP) – have proved particularly popular with major banks in Saudi Arabia, UAE, Turkey, Bahrain etc.
We have also signed landmark DCIP agreements with government export programmes and multilaterals. In December 2013, for instance, we signed a DCIP agreement with the Bahrain-based Arab Petroleum Investments Corporation (APICORP), the multilateral development bank owned by the ten member nations of the Organisation of Arab Petroleum Exporting Countries (OAPEC).
The DCIP will support APICORP’s trade-finance business growth by easing risks in trade finance transactions through helping it effectively manage risks affecting its Letter of Credit (LC) transactions and LCs of petroleum products exports in ICIEC member countries.
ICIEC has a similar agreement in place with the Saudi Export Programme (SEP). Recently this agreement was further enhanced through the joint marketing of certain products, including the DCIP. We are also reinsuring some of their transactions, and are also working on a cooperative arrangement whereby SEP will finance transactions insured by ICIEC for Saudi exporters.
Similarly under our FIIP, ICIEC offers insurance covering equity investment, financing facilities, guarantees and the non-honouring of sovereign obligations.
Under its Reinsurance Programme ICIEC provides reinsurance support to ECAs in member countries or elsewhere through its Quota Share Treaty and Reinsurance Facility Agreement with major international reinsurers.
Product innovation remains at the core of ICIEC’s future strategy. We have recently launched the Bank Master Policy for Istisna Financing, which will protect Islamic banks against non-payment risks of obligors in Istisna financing structures especially related to the construction and project industry.
We have also pioneered a unique product, Sukuk Insurance Policy (Sukuk Takaful), which will allow Sukuk issuers (initially sovereign ICIEC member countries) to utilise Sukuk Al Ijarah to tap into capital markets, with an ICIEC insurance cover providing added security to the Sukuk investors, against the non-payment risks of the Sukuk issuer/sponsor.
This product will enable, in particular, those member countries which are rated below investment grade or are unrated, to gain access to international capital markets. ICIEC’s insurance cover, given its Aa3 rating by Moody’s, will serve as a strong credit enhancement mechanism, and encourage international banks and investors to participate in such Sukuk offerings.
The Corporation’s international standing among peer institutions is proven. It is a member of the Berne Union, the association of ECAs globally.
It enjoys close cooperation with the Multilateral Investment Guarantee Agency (MIGA), the investment guaranty entity of the World Bank Group, which views our Corporation as a strategic reinsurance partner in our member countries.
It is a founder member of the AMAN Union, which brings together export credit and investment risk insurance agencies in the Arab and Islamic world under one umbrella.
For the last two years ICIEC held the General Secretariat of the Union and under its watch the insured business by members reached US$19.04 billion in 2012 – an increase of 11.5 per cent on the US$17.04 billion in 2011.
In Doha in December 2013, the AMAN Union also launched a Credit Information Database, which is the first of its kind established for the benefit of members for the exchange of credit information, opinions and underwriting experiences.
ICIEC is also expecting more business to come from export credit agencies (ECAs) in industrialised countries, and has already signed agreements with Atradius, the Dutch ECA, and with Ducroire Delcredere, the Belgium ECA. This is because of a change in ICIEC’s mandate to also support the imports of capital and strategic goods into its member countries.
Under the reinsurance agreement with the Belgium ECA, ICIEC is able to issue policies on behalf of Ducroire in all ICIEC member countries, and Ducroire will provide reinsurance to ICIEC for these policies. Already three policies with total business insured in excess of US$40 million were issued in 2013.
We have also done some transactions with SinoSure, the Chinese export credit agency, which is the largest in the world in terms of volume of business insured.
Another major achievement in 2013 is our cooperation with Cargill Inc., one of the world’s largest commodity traders, which has operations in almost all ICIEC member countries. ICIEC cooperates with Cargill to provide non-payment risk insurance cover to the company for obligors, which may be based in ICIEC member countries and elsewhere.
Given that a major portion of Cargill’s business is in the food commodities sector, the relationship is a perfect fit for the mandate of the Corporation, to promote food security in our member countries.
Going forward, in the wake of the Arab Spring, the Eurozone sovereign debt crisis, and the on-going challenging business environment globally that is continually changing at an increasingly rapid pace the demand for political risk and sovereign risk insurance especially is increasing.
During 2014, our strategy is to focus more on investment insurance structures and project finance, but at the same time continuing to underwrite our export credit insurance business because it is an essential part of our mandate to support the exports of our member countries.
