Reinsurance agreement bolsters export finance

A bilateral reinsurance agreement promises more attractive financing for large projects with sourcing from both Sweden and the US.

Investors and government agencies need to collaborate and pool their resources to finance large-scale transitional projects in renewable energy and infrastructure worldwide. Projects involving participants and suppliers from different countries can benefit from reinsurance agreements between the ECAs of participating nations, which lower the risk to lenders and strengthen the financial capacity of the export finance system.

To this end, the Export-Import Bank of the United States (EXIM) and EKN signed a reinsurance agreement in 2023 that enables EXIM and EKN to collaborate in providing more comprehensive support to American and Swedish companies.

The first project to be covered under the new agreement is a solar energy project in Angola, co-developed by the US company Sun Africa, with equipment supplied by the Swedish-based Hitachi Energy. The Swedish contribution is based on unique HVDC technology, which is highly critical to the project's success. EXIM is the lead ECA, while EKN provides reinsurance equivalent to the share of Swedish content in the project.

ECAs from several countries can pull their resources to enable funding on attractive terms and long durations, while limiting the exposure of an individual ECA.

Lena Bertilsson, Head of Business Area Large Corporates, EKN

Lena Bertilsson, Head of Business Area Large Corporates at EKN, highlights the growing appetite for cooperation between countries and their ECAs. “We are witnessing an increasing need to collaborate, particularly in the large projects required for the transition to renewable energy and green transport. Together, suppliers from different countries form value chains that deliver the best solutions available with the help of the combined expertise from different countries.”

The multi-billion-dollar price tags of transitional investments also support the case for joint funding. Reinsurance among ECAs is a practical means of strengthening the financial capacity of export finance to support complex, multi-sourced projects. “The sheer size of some projects may render them difficult for a single ECA to cover on its own, but ECAs from several countries can pull their resources to enable funding on attractive terms and long durations, while limiting the exposure of an individual ECA. It’s all about bolstering the capacity of the global export credit system to finance major investments by making more capital available on attractive terms.”

Additional multi-ECA benefits

The involvement of multiple ECAs may also enhance the rigour of pre-deal sustainability assessments.

Furthermore, the Swedish-American reinsurance agreement provides Swedish exporters with a seat at the table in large global infrastructure projects where US suppliers or EPC companies are involved. Smaller companies may lack the resources required to stay informed about international tenders for which they might be considered, but Team Sweden* can help, argues Bertilsson: “This is what Team Sweden is all about, to position Swedish industrials in relevant projects and open new doors to future collaborations.”

She looks forward to closer cooperation with EXIM. “Swedish exporting companies have a great deal to offer in areas such as renewable energy and 5G.”

Last but certainly not least, the people of Angola will gain access to renewable, affordable energy, as well as improved access to potable drinking water, thanks to this project.

*) Team Sweden is a network of public organisations, agencies, and companies that promote Swedish exports and investments in Sweden. EKN, SEK, Business Sweden, and Swedfund are members.