KfW guarantee doubles AEGF’s reinsurance capacity to USD 1 bn

KfW guarantee doubles AEGF’s reinsurance capacity for green energy projects to USD 1 bn

With this guarantee of USD 50 million, KfW joins the European Investment Bank (EIB), private reinsurer Munich Re and the African Trade Insurance Agency (ATI) as the fourth pillar of the African Energy Guarantee Facility. The European Union is backing KfW’s guarantee through its EUR 5.1 bn (USD 5.9 bn) External Investment Plan, which promotes investment across Africa and the EU Neighbourhood. As a de-risking platform for insurers, AEGF provides the extra capacity to back insurance against the political risks that so far have prevented investors and lenders from financing energy projects in Sub-Saharan Africa, i.e. traditional political risks, including expropriation and civil unrest, but also extended political risks such as breach of contract and offtaker default.

KfW’s guarantee means AEGF now has a capacity of USD 1 bn to back insurance solutions designed for these risks. The push to provide effective de-risking for green energy development loans and investment projects through a reinsurance platform such as AEGF is aligned with the UN’s Sustainable Development Goal 7 (SDG7) to ensure universal access to reliable, affordable and sustainable electricity by 2030.

To achieve this goal for Sub-Saharan Africa, an estimated USD 100 billion will need to be invested in energy generation, transmission and distribution throughout the region over the next decade. The availability of effective risk protection through AEGF-backed insurance will make green energy projects decidedly more attractive to both local and international equity investors and commercial banks.