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In the volatile world of political risk, short-term crises can sometimes prevent much needed long-term investments.

As a Risk Manager for XL Catlin’s Political Risk, Credit and Bond team, I analyze country conditions and credit risks facing emerging market investors, helping my team to insure complex projects against the political and macroeconomic risks that drive today’s headlines. A strong focus on risk analytics enables us to make well-informed underwriting decisions and provide long tenors to the parties that finance important projects around the world.

The global infrastructure gap is one of today’s top economic stories, and there is no shortage of development projects that require long-term financing. Infrastructure needs attention in developed countries where systems are aging, but especially in emerging markets that require new infrastructure to address urbanization and expand economic opportunity. For example, consider just a few publicly announced projects in the pipeline (not necessarily ones that XL Catlin has insured):

  • Turkey is planning $10 billion in investments in hospital construction
  • Ghana is implementing a $7 billion upstream oil and gas project to fuel the country’s power grid
  • A new airport project in the United Arab Emirates is valued at $4 billion
  • Indonesia has a $2 billion power plant underway
  • Colombia is reconstructing a $1 billion toll road
  • India is undertaking a $900 million seaport expansion
  • Mexico City is embarking on a $600 million expansion of its subway system

Our team uses our broad capabilities in analyzing country risk and project economics to understand the challenges that can derail projects like these.

Large-scale infrastructure projects can have a transformative effect on a nation’s economy, from opening new sectors to helping attract foreign direct investment. However these projects also tend to require significant up-front investment, rely on government stability over the course of decades, and can be politically sensitive as they center on assets used by the general public. Our team uses our broad capabilities in analyzing country risk and project economics to understand the challenges that can derail projects like these.

Global debt investors are a driving force in infrastructure project finance, but while they see the financial upside and social impact of such investments, their regulatory and risk management considerations may limit just how many long-term projects they can support, especially in high-risk countries. Similar to how primary insurers receive surplus relief and accounting credit for purchasing reinsurance, banks can achieve capital relief using political risk and credit coverage, sharing the risk with insurers like XL Catlin and freeing up their capital to invest more around the world.

It is only in the past few years that some underwriters have achieved the ability to cover complex project finance risks for up to 20 years. These capabilities could not have come at a better time. In the past, sovereign governments often used their own revenues or borrowed directly from the capital markets to finance major infrastructure spending. However for many countries, especially those that rely on revenues from crude oil and metals to fund their budgets, obtaining financing has become a major challenge since commodity prices began to fall in 2014.

In this environment, governments have increasingly adopted project finance models to provide infrastructure for their populations. In some cases, state-owned companies sponsor revenue-generating projects and borrow from banks, expecting to repay the loans with income from the project (e.g. income from gas sales or tolls). Private companies also rely on bank financing to sponsor economically self-sustaining infrastructure projects, with support from the host-country government in the form of revenues, performance guarantees, or even equity investment. Whether the project sponsor is from the government or the private sector, banks commonly lend for up to 15-25 years, but until recently, they could typically only obtain tenors of seven to 10 years in the insurance market. XL Catlin’s investment in a rigorous methodology for assessing project finance risks makes us one of few insurers able to support banks for 15 to 20 years, far longer than in the past.

It’s worth noting that in addition to bank debt, we have seen the expansion of capital markets options for project financing, including funding from institutional investors and private equity seeking new asset classes and better returns over longer tenors. These investors are increasingly looking to share their risk with insurance partners. Equally important are multilateral development institutions and national export credit agencies, which in addition to providing financing, offer credibility and attract other investors to a project. These traditional financers of infrastructure projects count private sector political risk and credit insurance as one of the tools they use to manage risk and aggregations, given their large participations in transformative projects.

One of the things I enjoy most about my job is when projects we support make front page news as success stories in transforming their economies. I also love the fact that we never know what projects are going to come across our desks; every day offers new puzzles to solve. Even though we analyze complex transactions that can take months to close, we can usually provide an initial indication on coverage amounts and tenors within a few days. We do so by looking holistically at factors that influence a project’s risk profile, including the industry, project economics, country risk, and the strategic importance of the investment for the country’s future.

For more information on how XL Catlin is helping investors around the world to do more using political risk, credit and bond insurance, visit

About the Author 

Mena Cammett is a Risk Manager with XL Catlin's Political Risk, Credit & Bond division, where she evaluates complex financing transactions in emerging markets. Prior to joining XL Catlin in 2013, she was an analyst in the U.S. Government’s political risk insurance agency, and a consultant advising investors on competitive intelligence and risk management in challenging geographies. Mena holds a Bachelor of Arts degree in Middle East Studies and a Master of Business Administration, both from Yale University.

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