Rise in insurance as investors eye risky markets

The Multilateral Investment Guarantee Agency, an arm of the World Bank, provided a record $2.1bn of new investment guarantees for projects in developing countries in the fiscal year to the end of June 2011 – a 43% increase on the previous year.

The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm of the World Bank which supports infrastructure projects in developing countries, issued a record $2.1 billion in new investment guarantees in the fiscal year to the end of June 2011. This represented a 43 percent increase on the previous year and brought MIGA’s total portfolio to $9.1 billion.

The upsurge in demand for political risk insurance implies an increasing interest in investing in riskier, developing markets. “Our fiscal year results confirm that foreign direct investment (FDI) in developing countries has picked up since the sharp contraction of 2009, despite important, lingering economic concerns,” said Izumi Kobayashi, MIGA’s executive vice president, in a statement.

She added: “At the same time, events in the Middle East and North Africa have created a resurging awareness of political risk. In this still-evolving economic and political environment, FDI is critical to growth and we have sent strong signals that MIGA is open for business.”

MIGA said in the statement that 72 percent of contracts signed during fiscal year 2011 fell into one or more of its target categories: investments in the world’s poorest countries; “South-South” investment (from one developing country to another); investments in conflict-affected countries; and investments in complex projects.

During the period, MIGA provided its first guarantee in Iraq, backing an investment by a Turkish company into a Baghdad-based plant manufacturing material for beverage bottles.