Axa XL and Axis Capital support $1bn securitisation transaction

Bermudian-based insurers Axa XL and Axis Capital have played key roles in a landmark $1 billion securitisation in Latin America and the Caribbean launched by IDB Invest, the multilateral development bank.

IDB Invest said the transaction was the first of its kind for private sector investors to buy multilateral development bank assets from Latin America and the Caribbean. This innovative financial structure seeks to create a new MDB asset class for international investors.

The transaction, called Scaling4Impact, consists of securitising $1 billion of IDB Invest’s portfolio, creating a tranched structure with an $870 million senior tranche; a $100 million mezzanine tranche, a portion of which was sold to international investor Newmarket Capital, and the remainder insured by Axis and Axa; and a $30 million junior tranche retained by IDB Invest.

The securitised portfolio includes assets from 20 countries and ten sectors, such as corporates, infrastructure, energy and financial institutions. The transaction will free up capital, creating up to half a billion in additional lending capacity for new development projects.

Similar recent deals by IDB Invest suggest this could attract around $4 billion from institutional investors through instruments like the 144a RegS B-bond in international debt capital markets.

“With our new originate-to-share business model, our strong ties with governments and the deep synergies between our private and public sector work, we’re uniquely positioned to attract private capital,” said IDB president Ilan Goldfajn.

“Through this landmark transaction, we are connecting development assets with global investors to scale impact in Latin America and the Caribbean.”

IDB Invest said this groundbreaking transaction aligned with key G20 recommendations from the Independent Review of Multilateral Development Banks’ Capital Adequacy Frameworks, including financial innovation, balance sheet optimisation through private sector risk transfers, enhanced engagement with rating agencies, and leveraging the Global Emerging Markets database to showcase MDB asset performance to private investors.

“Axa XL is proud to be a key risk partner in this innovative transaction,” said Scott Gunter, the chief executive.

“Our involvement in Scaling4Impact shows our commitment to working with global multilateral organisations like IDB Invest, leveraging our political risk and credit expertise to drive progress and protect what matters.

“We look forward to continued collaboration to drive meaningful development in emerging markets.”

Mark Harwood, head of Capital Risk Solutions, Axis, said: “Axis has a long and successful history of insuring multilateral development banks across a wide range of asset classes in developing countries.

“We are delighted and honoured to be partnering with IDB Invest, together with Newmarket Capital and co-insuring alongside Axa XL, on this landmark $1 billion securitisation transaction in support of IDB Invest’s mandate to promote and accelerate economic and social development across Latin America and the Caribbean.”

IDB Invest is a member of the Inter-American Development Bank Group. It finances sustainable companies and projects to achieve financial results and maximise economic, social, and environmental development in the region.

With a portfolio of $21 billion in development-related assets under management and 394 clients in 25 countries, IDB Invest said, it provided innovative financial solutions and advisory services that meet its clients’ needs in various sectors.