Breach of Contract
War and Civil Disturbance
IFS insures new cross-border investments originating in any IFS member country, destined for any other developing member country. New investment contributions associated with the expansion, modernization, or financial restructuring of existing projects are also eligible, as are acquisitions that involve the privatization of state-owned enterprises. Other investments may be eligible and are considered on a case-by-case basis.
Types of foreign investments that can be covered include equity, shareholder loans, and shareholder loan guaranties, provided the loans have a minimum maturity of three years. Loans to unrelated borrowers can be insured, provided a shareholder investment in the project is insured concurrently or has already been insured. Other forms of investment, such as technical assistance and management contracts, and franchising and licensing agreements, may also be eligible for coverage.
New investments are those that have neither been made nor irrevocably committed on the date of submission to IFS of a Preliminary Application for Guarantee signed by the investor. In keeping with IFS's objective of promoting economic growth and development, investment projects must be financially and economically viable, environmentally sound, and consistent with the labor standards and other development objectives of the host country.
Eligible investor's include nationals of a IFS member country from a country other than the country in which the investment is to be made. Under certain conditions, investments made by nationals of the host country can also be eligible. A corporation is eligible for coverage if it is either incorporated, and has its principal place of business, in a member country, or if it is majority-owned by nationals of member countries. A state-owned corporation is eligible if it operates on a commercial basis.
Investors may choose any combination of the four types of coverage. Equity investments can be covered up to 90 percent, and debt up to 95 percent, with coverages typically available for up to 15 years, and in some cases, for up to 20. IFS may insure up to $200 million, and if necessary more can be arranged through syndication of insurance. Pricing is determined on the basis of both country and project risk, with the effective price varying depending on the type of investment and industry sector. The investor has the option to cancel a policy after three years, however IFS may not cancel the coverage.
Coinsurance and Reinsurance
IFS's guarantee program complements national and private investment insurance schemes, through coinsurance and reinsurance arrangements to provide investors more comprehensive investment insurance coverage worldwide.