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Types of Coverage

OPIC is taking an innovative approach to political risk insurance to support U.S. capital markets financing structures that catalyze private capital in emerging markets. Through issuance of Non-Honoring of a Sovereign Guaranty (NHSG) and Breach of Contract for Capital Markets (BOC) insurance for capital markets financings, OPIC can mobilize investment grade capital markets funding for transactions. This innovative approach to political risk insurance provides new investment opportunities for investors in the U.S. bond markets and supports alternative financing for important emerging market projects.

Non-Honoring of a Sovereign Guaranty

OPIC offers NHSG insurance for U.S. bond capital markets financings of projects carried out by state-owned enterprises that are supported by sovereign guaranties. NHSG coverage protects investors if a sovereign government fails to “honor” an explicit, irrevocable sovereign guaranty of the borrower’s debt obligation. NHSG coverage is generally available in countries with a public rating of B/B+ or better. To use NHSG coverage the project must be financially sustainable on an overall basis from revenue sources or cost savings that are identified, related to, and available for the project. Transactions utilizing NHSG coverage are expected to receive the same credit rating as the U.S. Government. Eligible loans must meet all of OPIC’s policy criteria and generally have a tenor of ten or more years.

Breach of Contract for Capital Markets

OPIC offers BOC insurance for U.S. bond capital markets financings that support highly developmental projects that are prioritized and carried out by sovereigns and sub-sovereigns, and in certain instances, state-owned enterprises. This coverage insures against the risk that the sovereign breaches the terms of the financing and then either fails to pay a valid arbitral award against it or obstructs and/or frustrates the arbitration process. The BOC product provides an avenue for lower-middle income countries to seek investment grade financing in the U.S. capital markets. BOC coverage can only be considered if the sovereign is a signatory of the New York Convention or other similar convention. All BOC projects must be strategic for the sovereign and exhibit strong developmental impacts in the host country. Projects that result in a net savings for the sovereign or have a tax or revenue stream to facilitate repayment are best suited for this product. It is anticipated that notes utilizing BOC coverage will receive a credit rating of single A or higher.