The global financial crisis and regional unrest has stoked demand for insurance from a major multilateral export credit and investment insurer.
Islamic Development Bank insures more than $3 billion of deals
More than US$3 billion (Dh11.02bn) of business deals were insured by the export credit and investment insurance arm of the Islamic Development Bank (IDB) last year.
Driven by demand to guard against the global financial crisis and regional instability, the value of deals insured soared 63 per cent jump from 2010, when $1.9bn of deals were financed by the Islamic Corporation for the Insurance of Investments and Export Credit (ICIEC).
"We had a very good year in 2011," said Owais Diyan, the head of operations in the Dubai office of ICIEC. "We have had the global financial crisis where bankruptcies have hit the roof, and that gave a fillip to exporters seeking credit mitigation insurance. We also had the issues in the Arab world, and both of these combined to give credit insurance a boost."
The strong performance also came amid a year in which ICIEC opened an office in Dubai to complement its existing headquarters in Jeddah. The Dubai office has helped to secure a growing number of deals.
ICIEC also attributes the surge to its unrolling of new insurance products for political risk. One is a non-honouring of sovereign obligations policy, which insures banks against the non-payment by governments.
The insurance was taken out by banks insuring two infrastructure projects in the UAE recently. One is a $90 million water desalination plant in Ras Al Khaimah and the other is a $200m infrastructure scheme in Dubai.
Demand has also been strong for ICIEC's contract frustration policy, another new insurance product protecting contractors against unfair cancellation of projects by governments or a local firm. Turkish construction firms operating in Libya have shown particular interest in the policy. ICIEC signed a deal with the Turkish Export Bank to provide political risk insurance to companies in the country.
"What happened with Turkish contractors in Libya was that when war broke out they lost close to $1bn of equipment and projects which were halfway completed and were damaged by war and they didn't have insurance to cover them," Mr Diyan said. "The events have sensitised them and they are looking to have cover in future." Another reason for the rapid rise in ICIEC's insurance liabilities was a change in policy last year. It enables non-IDB countries to take out insurance for trade with IDB members.
The euro-zone crisis has led many European firms to switch their focus to faster-growing markets such as Africa and the GCC.
"We are seeing a lot of uptake from European and Far Eastern-based manufacturers who want credit insurance cover to sell to this region," he said.