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MIGA Guarantee Facility (MGF)

Objective and Additionality

The MIGA Guarantee Facility (MGF) expands coverage through shared first-loss and risk participation via MIGA reinsurance. The MGF aims to bridge the gaps where market and MIGA-arranged capacity for eligible non-commercial risks is not sufficient or available to crowd in private investment into IDA PSW-eligible countries. MGF provides coverage for a combination of political risk insurance (PRI) products, covering non-commercial risks such as expropriation, currency transfer restriction and inconvertibility, war and civil disturbance, and breach of contract on key project agreements covering government (sovereign and sub-sovereign/SOE) obligations. The MGF participates in risk mitigation solutions executed by MIGA, to support private sector investments (i.e., debt and equity) in IDA PSW-eligible projects.

The MGF provides additionality by increasing both the scale and scope of MIGA’s activities in IDA PSW-eligible countries. This additionality is demonstrated by an increased number of projects and associated volumes of transactions that MIGA undertakes beyond what is currently projected.1 The MGF is utilized when existing MIGA PRI instruments are required to advance the project, but there is insufficient MIGA or market capacity to provide the coverage needed (e.g., where MIGA has reached exposure limits, or private market capacity does not exist, is insufficient or cost prohibitive). It is particularly useful in the case of large-scale, systemically important transactions, programmatic approaches to sectors involving multiple projects, or multi-sector approaches.

Financial Transaction Mechanics

MGF is deployed in two structures: (i) shared first-loss, and (ii) risk participation akin to reinsurance. The MGF has an overall designated limit of up to $500 million, with this limit being the total exposure of IDA PSW under both structures. Claim amounts are disbursed by IDA using MGF resources (through a risk sharing agreement with MIGA) to MIGA, upon a call on the guarantee by the beneficiary pursuant to a claim determination as per the MIGA contract.

Contact: Nabil Fawaz, Operations Manager, MIGA, nfawaz@worldbank.org


[1] Over the FY18-20 period, through structures with first loss and risk participation akin to reinsurance, every dollar of PSW resources deployed through MGF is expected to result in up to $5 of private sector investment mobilized and co-financed in MIGA projects, similar to MIGA’s experience with the Conflict Affected and Fragile Economies Facility (CAFEF), but adjusted for expected higher risk markets and/or higher risk transactions.