Climate change risk in the MENA region has evolved into a core economic and investment challenge, shaping infrastructure planning, trade competitiveness and long-term capital allocation. Risk-mitigation instruments, including specialised insurance and credit enhancement solutions, can serve as catalysts in mobilising sustainable growth across the region.

Rising temperatures, prolonged droughts, increased flooding and water scarcity are undermining agricultural output, supply chains, energy systems and investment decisions across the region. For governments, lenders, exporters and project sponsors, climate resilience has now become a central component of economic security, infrastructure planning and long-term growth.

MENA sits at the centre of this transition. Countries across the region see the utility in diversifying their energy mix beyond hydrocarbons through scaling renewable energy to meet ever-increasing demand for electricity. These countries are also addressing the inter-connected challenges of water and food security and secure value chains. These projects require substantial long-term financing and strong risk mitigation structures to achieve bankability and attract private capital. This is where export credit insurance, political risk insurance, reinsurance and credit enhancement can help unlock climate-resilient development.

A region of strategic opportunity

Many ICIEC Member States have programmes in renewable energy, water security, transport and logistics, food systems and industrial diversification. With the MENA region having renewable energy corridors, desalination infrastructure, green hydrogen projects and a regional logistics network, it is poised to be one of the most important markets for trade credit and investment guarantees over the coming decade. These projects often involve long maturities, require international partners and sovereign-backed counterparties. In many cases, there is a high perception of risk, which raises financing costs and limits private sector participation.

ICIEC, as a multilateral insurer, offers credit enhancement instruments that help reduce the cost of lending, whilst its risk mitigation covers non-payment risk for financing parties and project sponsors due to commercial and political risks, making transactions and projects more viable overall. The result is greater participation by international and regional banks, stronger trade resilience and more diverse sources of long-term capital providers for various sectors that are crucial to climate adaptation and green growth.

Where de-risking is needed most

The strongest de-risking needs are concentrated in the water–energy–food nexus, a central pillar of MENA’s resilience agenda. Renewable energy projects, including solar, wind, waste-to-energy, and both blue and green hydrogen, require long-term financing and dependable offtake arrangements. Desalination, water reuse and sanitation infrastructure are capital intensive and often benefit from credit enhancement. Climate-resilient irrigation systems and localised agricultural value chains are crucial to reducing food import volatility and supporting rural economies.

Sustainable transport, green industry and climate-resilient urban infrastructure and social infrastructure also require substantial de-risking support. The same is true for trade in essential goods and services. Emerging carbon markets may become another area where insurance and guarantees provide market stability as regulatory frameworks mature. Across these sectors, ICIEC’s role is not only to support capital mobilisation but also to improve project bankability by reducing commercial and non-commercial risks that might otherwise keep lenders and investors on the sidelines.

ICIEC’s mandate and instruments

ICIEC is a member of the Islamic Development Bank Group and the only multilateral insurer operating exclusively on a Shariah-compliant basis. Its mandate is to facilitate trade and investment among Member States through Shariah-compliant export credit insurance, political risk insurance, reinsurance and credit enhancement tools. These instruments enable banks, investors, exporters, contractors and sovereign-backed entities to manage payment default, currency transfer restrictions, expropriation and breach of contract as well as non-honouring of sovereign obligations in long-term projects with a transboundary investment element. In practice, ICIEC helps direct capital toward projects and trade corridors that might otherwise struggle to secure financing.

A track record anchored in climate-relevant business

ICIEC’s track record shows how risk mitigation can support sustainable development at scale. Since ICIEC’s inception in August 1994, cumulative business insured has reached $138.9bn, including $17bn in 2025 alone. These figures underline the ICIEC’s continuing relevance as Member States seek to mobilise capital for development and resilience.

MENA represents ICIEC’s largest regional footprint. Total business insured in Member States located in MENA stands at about $110.9bn, nearly 80% of ICIEC’s overall portfolio since inception. Approximately $100bn relates to trade and $10.8bn channelled to inward and outward investment. This concentration reflects both the scale of economic activity in the region and strong demand for Shariah-compliant, development-oriented risk mitigation solutions.

Over the past decade, engagement in climate-related sectors has expanded significantly. ICIEC has supported clean energy projects since its inception, with $6.8bn insured for a renewable energy mix, including solar, wind and waste-to-energy. ICIEC has also facilitated $1.42bn in clean water and sanitation projects and $7.7bn in non-energy green projects between 2015 and 2025. Regional examples supported by ICIEC include political risk insurance for equity investors in the Benban Solar Complex in Egypt, which was the largest project of its kind; reinsurance for two wind farms in Türkiye; reinsurance support for the Sharjah Waste-to-Energy Facility; and major reinsurance support for the Riyadh Metro construction project under Saudi Arabia’s Vision 2030.

ICIEC’s developmental impact goes beyond sectoral coverage. In 2025 alone, ICIEC de-risked transactions and projects worth $450m of private sector capital, supported over 294,000 jobs and enabled 5,998 small and medium-sized enterprises to access essential goods and services. ICIEC also supported with $889m in coverage for social infrastructure and $408m in other key social development categories, as reported for the year. These outcomes and positive momentum encompass climate-resilient trade and investment, which will translate into tangible benefits for people, businesses and the planet. The ICIEC Climate Change Policy continues to embed climate considerations in underwriting, risk management and impact assessment, whilst membership in global partnerships such as IRENA’s Energy Transition Accelerator Financing Platform (ETAF) synergises the origination of green projects by connecting key stakeholders.

Challenges that warrant honest reflection

Scaling climate-related insurance in MENA holds great potential and necessitates de-risking solutions. In some markets, project pipelines remain thin and feasibility studies do not always meet international lender standards. Long tenors combined with currency convertibility and transfer risks can complicate structuring. Regulatory uncertainty, evolving carbon markets, limited climate-risk data and uneven local insurance and reinsurance ecosystems also continue to slow progress.

The water–energy–food nexus also demands more innovative coordination. Governments, multilateral development institutions, export credit agencies, reinsurers, financiers, investors and project sponsors need to work together more deliberately. None of these barriers are insurmountable; overcoming the challenges requires a more integrated public-private approach.

Practical pathways forward

Several practical steps could accelerate climate-resilient trade and investment. Multilateral insurers, export credit agencies, reinsurers, development banks and private insurers can embed and systemise risk-sharing arrangements to expand capacity and extend cover. Better project planning and preparation and stronger feasibility work would improve bankability earlier in the project lifecycle. Credit and political risk insurance and credit enhancement structures can crowd in private capital where its patrons are hesitant to commit.

Progress also depends on stronger climate finance ecosystems. It is important to coordinate national diversification strategies, local and regional reinsurance capacity, enhanced climate-risk data and objective impact measurement in a more optimal manner. More widely accepted regional frameworks for carbon trading and green investment would also reinforce market confidence. An overarching objective should be to connect risk mitigation solutions offered by ICIEC and peers, public-private partnerships in renewable energy, water, agriculture and transport, and to increase awareness of how insurance and guarantees can make projects viable.

Conclusion

Scalable capital alone will not deliver MENA’s climate transition. The MENA region needs effective institutional partnerships and risk management tools that can turn climate ambition into bankable, resilient and development-oriented projects. ICIEC’s role is to reduce the barriers associated with commercial and political risk in a way that catalyses trade and investment flows within a development-focused and Shariah-compliant framework. As Member States accelerate climate adaptation and energy diversification efforts, de-risking instruments will play an increasingly important role in mobilising effective capital, strengthening investor confidence and delivering impact at scale across the region.

Dr Khalid Khalafalla is CEO of The Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC).

The achievement of the Sustainable Development Goals (SDGs) by 2030 is dependent on the ability of the global financial system to mobilise and distribute the capital on a level never experienced before (Lagoarde-Segot, 2020). It is empirically determined that the low- and middle-income countries are facing an annual financing gap of more than four trillion United States dollars in the quest to achieve both development and climate goals (Clark, Reed & Sunderland, 2018). Despite the growth in sustainable finance, ESG investment and impact-oriented approaches, capital flows are still not right in relation to development needs and are concentrated in less-risk and more-income situations (Theodos et al., 2024).

In this milieu, two processes, namely, ratings and blended finance play an important part in influencing decision making in investments. Although the functions of both mechanisms are to alleviate the information asymmetries and risk management, the existing structure and implementation usually do not contribute to meaningful impact reporting (García‐Sánchez & Noguera‐Gámez, 2017). To enhance sustainable development finance, therefore, a thorough knowledge of the functioning of these tools, their shortcomings, and how they can be re-focused to achieve development outcomes is needed.

The Power and Limits of Ratings in Sustainable Finance

Ratings play a pioneering role in international financial markets in terms of perception, pricing, and regulation of risk. The credit rating influences the cost of sovereign and corporate bonds, the qualification of institutional portfolios and the level of capital regulation (Grittersová, 2020). ESG ratings have also become authoritative through indicative effects on sustainability performance to any investor wishing to incorporate environmental, social and governance factors in decisionmaking (Ziolo et al., 2019). Within the development environment, ratings are used as a gatekeeping mechanism: they carry out whether nations, project or organisations are considered investment worthy by large groups of capitals (Fini et al., 2023). To this end, ratings have significant power in creating and affecting the flow of capital to the emerging and developing economies.

Sovereign credit ratings place more emphasis on the macroeconomic indicators that are short-term in nature such as fiscal balance, inflation control and external debt indicators that are medium-term in nature (Barta, 2024). Although these factors are key to the financial stability, they do not always reflect long-term drivers of growth such as investments in education, healthcare, climate change adaptability and institutional capacity. As a result, nations that pursue the needed, but capitalintensive development projects can face the burden of ratings and high interest rates on borrowing, despite the fact that the development projects increase resilience and productivity in the long-term (Apostolou et al., 2025). This dynamism creates a structural bias that shuns accurately the outlays necessary to meet the SDGs.

Different approaches used by the providers result in variations of evaluations, thus reducing their usefulness as tools of decisions (Hellweg et al., 2023). Most of the ESG ratings are on the effect of environmental and social matters on financial risks of firms instead of the practical impact of corporate operations. Good disclosure practices and risk management systems might enhance the scores but may not be translated into any measurable social or environmental results (Landi et al., 2022). ESG ratings are therefore often meritocracy-based, as opposed to outcome-based, and offer little direction on concentrating capital in high-impact development initiatives.

Impact Blind Spots in Current Rating Frameworks

The major weakness with the current rating systems is the fact that they cannot substantively measure the impact of development. The ratings seldom put additionality into consideration where additionality is whether an investment provides the effects that would otherwise not have been the case without the capital (Salzman & Weisbach, 2024). They also have complexities in taking into consideration contextual issues, including the base level of infrastructure, income or access to services in a particular country or community. Consequently, the impact of a particular project will have significantly varied outcomes of development across the geographical region, but ratings generally have a tendency to use homogeneous standards (Wang et al., 2023). Such blind spots lead to the capital allocation systems that tend to prioritise low-risk systems over high impact opportunities, and thus subversive to the transformational impetus of sustainable finance (Udohaya, 2025).

Blended Finance: Conceptual Promise and Practical Constraints

Blended finance has become a prominent approach to tapping into the private capitals by facilitating the development goals. It aims to correct market failures that would discourage private investments through a combination of concessional capital by the public or philanthropic sources with commercial investments (Havemann, Negra & Werneck, 2022). Blended finance fits well in the areas that are associated with the need to create a sustainable world such as renewable energy, climate resilience infrastructure, agriculture, healthcare, and affordable housing (Leal-Arcas et al., 2025).

Practically, blended finance has not been able to attain the preferred size and effectiveness. Mobilisation ratios (amount of private capital inflow raised on a unit of concessional capital) are often smaller than expected (Attridge, 2022). Development finance actors and the wide variety of public actors are characterised by risk aversion, which limits their readiness to support true first loss capital or to have uncertain returns (Lulek, 2025). As a result, blended finance is also used to finance projects and initiatives that would otherwise have probably gone on without concessional finance so in additionality and efficient allocation of limited public resources are questioned.

Weak Impact Accountability in Blended Finance

Lack of strong impact accountability is also another major threat facing blended finance. Despite development goals often being offered as the justification of concessional aid, the measurement of impact is often pushed to the second position in relation to financing structuring and raising capital (Dye, 2022). This poor accountability undermines trust among investors, policymakers and citizens and inhibits the ability to learn through experience and to improve on the coming transactions (Agu, Nkwo & Eneiga, 2024).

The Disconnect Between Ratings and Blended Finance

Ratings and blended finance are rarely developed in such a way that they complement each other and thus lose the chance to appeal to the private capitals. Conventional credit rating is often unwilling to give due credit to risk reduction conferred by blended finance instruments like guarantees, political risk insurances or subordinated capital (Sharma et al., 2023). Therefore, undermining the effectiveness of the blended structures in signalling and precluding many investments complete the requirements imposed by institutional investors.

On the other hand, blended finance deals in the rule of thumb are often short of standardised, plausible indications related to quality of impact and additionality to development (Yunita et al., 2023). As such, the engagement is still limited to development-oriented investors instead of the venturing into mainstream capital markets. Such a mismatch of ratings and blended finance consequently limits the effectiveness of these two mechanisms and their general effectiveness (Attridge, 2022).

Toward Impact-Adjusted Rating Frameworks

To contribute to the sustainability of development, rating approaches should transform to denote the risks and opportunities of long-term outcome of development. It requires the shift in the risk definition that should include climatic transition and physical risks, demography, human capital formation, institutional strength, and social connectedness (Di Febo, 2025). These dimensions are becoming known to be of substance to the economic performance and financial stability, but they have not been given enough weight that they deserve in traditional measurements.

Blended finance should also evolve in case it is to have an effective influence in bridging the SDG financing gap. Replacement of transactions on a case-by-case basis with standardised platforms and vehicles can diminish expenditure

Moreover, the additionality of development and the importance of concessional capital should be specifically noted in the ratings. Additional metrics or complementary evaluations may include find out whether investments increase access to fundamental services, strengthen resilience, or inclusive development, and these results would be improbable in the absence of blended finance assistance (Udohaya, 2025). More standardisation, transparency and outside validation of impact measures would be required to guarantee credibility and avert impact washing.

Reimagining Blended Finance for Scale and Effectiveness

Blended finance should also evolve in case it is to have an effective influence in bridging the SDG financing gap. Replacement of transactions on a case-by-case basis with standardised platforms and vehicles can diminish expenditure, light speed and create an acquaintance with investors (Lagoarde-Segot, 2020). Replications can be used to enhance the learning process, efficiency, and enable more participation by institutional investors.

More importantly, public and philanthropic capital should be prepared to take a real risk in situations where the impact of development is maximised (Clark, Reed & Sunderland, 2018). At the same time, the accountability of impact should be enhanced with the help of obvious goals, outcome measures, and incentives of a dependent nature. Different strategies can be used to match the financial terms and the delivery of impacts and improve the level of transparency (Theodos et al., 2024).

The Role of Public Policy and Institutions

The key role of matching ratings and blended finance with sustainable development goals is undertaken by governments, development finance institutions, and multilateral organisations. Reform of policies to enhance data quality, transparency and regulatory predictability is capable of minimising perceived risk and contributing to the attraction of investment (García‐Sánchez & Noguera‐Gámez, 2017). This change will increase fragmentation and streamline operations and multiply the retaliation of development finance actors.

Interaction with rating agencies is especially essential as it is necessary to make sure that the approaches are based on development reality and they are not strengthening structural bias (Grittersová, 2020). Through collaboration, both the public and the private actors might be useful in reformulating the financial norms to ensure greater resilience in the long run, inclusivity, and sustainability.

Conclusion

Blended finance and ratings are potent tools in the world financial system, but they are not ready to deliver at scale and efficacy to achieve sustainable development objectives. Ensuring that ratings and blended finance can become an effective delivery tool is not a technical issue alone, but it also represents a bigger set of concerns about incentives, institutional requirements, and political will. To transform sustainable development from a dream to a basement, the financial systems need to change in terms of perceiving not only risk and profits, but also the reallife performance supporting long-term wealth and stability.

Buyers of insurance, both retail and commercial, have generally no dealings with a reinsurance company because reinsurance is a business-to-business transaction. Therefore, most people are not even aware of the existence of reinsurers who, at their end, have historically maintained a relatively low profile. This has changed as reinsurers publicly emerged as safety nets for direct insurers hit by massive disaster losses.

In its simplest form, reinsurance can be defined as insurance of insurance companies. Most insurers generally operate within their national boundaries and often offer cover that is limited to certain regions and customer segments. The capital base of many of those companies is exposed to disaster risk and cannot be simply strengthened without affecting affordability. As such, insurance companies rely on “risk capital” from third parties, in the form of reinsurance, to absorb large losses that unexpectedly deplete claims-paying resources and reduce underwriting capacity (Culp and O’Donnell 2010). Insurers transfer some of their risks to reinsurers in order to protect their balance sheets and to free up capital which, in turn, enables them to provide more risk-bearing capacity to their customers.

Reinsurers can pay for catastrophic losses because of their global diversification of risk portfolios and investment, making protection more broadly available at lower cost and higher security. This is how reinsurance creates value. The essential role of reinsurance is to support recovery efforts after disasters (such as earthquakes, typhoons, and floods) strike. Reinsurers are able to support community recovery efforts by paying claims that help communities rebuild. Equally important is the contribution of reinsurers to alleviating the financial consequences of mortality and health shocks. The recent COVID-19 pandemic serves as a case in point where reinsurers support their direct insurance customers in paying the costs of those who fall ill with the virus and require medical attention as well as by compensating families that have suffered the death of the main breadwinner.

By paying a premium to their direct insurer(s), individuals, households and corporates seek protection against a wide spectrum of specific risks, ranging from car accidents to flood disasters. Direct insurers, in the reinsurance context known as cedants, pass on entire portfolios of risks (where usually all premiums and losses are shared) or large single risks (covering losses exceeding a certain threshold) to globally operating and diversified reinsurers. The original policyholder is not involved in this transaction – the direct insurer remains the contractual partner.

Reinsurers assume the risk and add it to their portfolio of diverse risks. Typically, reinsurers are careful to diversify geographically and by type of risk. In order to limit their own exposure, reinsurers may sometimes pass on some of their risks to other reinsurers (known as retrocession) or to institutional investors who invest in insurance-linked securities.

The economic and societal benefits of reinsurance

Reducing the cost of risk on the back of global diversification Insurance is fundamentally about pooling: individuals or companies pay a premium in return for financial compensation in the event of a covered loss. The premium paid by the insured (the ‘policyholder’) is calculated so that it allows the insurer to honour its claims payment obligations and meet its non-claims costs such as administration expenditure and the cost of capital. Insurance premiums are a function of the risk covered: the greater the probability of the risk occurring and / or the potential severity of the risk, the higher the premium.

Insurance essentially works as a redistribution mechanism: the premiums paid by policyholders who experience no (or little) claims finance the indemnification of those who are less fortunate. This mechanism works because not all policyholders suffer a large loss at the same time. It is in this sense that the ‘pluricentennial’ motto of Lloyd’s of London – which defines insurance as “the contribution of the many to the misfortune of the few” – shall be understood. This principle of “collective solidarity” which constitutes the very foundation of the insurance and reinsurance business model is rooted in science. The underlying mathematical principles are known as the ‘law of large numbers’ and the ‘central limit theorem’. Intuitively, they state that when one combines a large number of risks which, to a significant extent or at least to some extent, are independent from each other, there is a ‘compensatory’ effect between these different risks. In the case of insurance, this effect occurs between the policyholders who suffer a loss and the policyholders who are not impacted. On this basis, the aggregate loss experience over the entire risk portfolio becomes relatively ‘predictable’. In other words, aggregating a vast number of individual policyholders’ risks creates a risk portfolio which benefits from a lower volatility of claims. How does this mechanism enable the insurer to offer coverage at a lower cost?

Insurers are required by regulators to hold capital that is sufficient to absorb large losses and meet their commitments to all their policyholders with a certain probability, which can be seen as a ‘security level’. The corollary to the diversification effect is that, for a given security level, the total amount of capital that the insurer is required to hold decreases in relative terms when its risk portfolio becomes more diversified, everything else being equal. In other words, diversification reduces the amount of required capital for the coverage of a given policyholder risk and, consequently, lowers the ‘cost’ of insuring that risk.

Now enter the distinction between insurance and reinsurance. It primarily lies in the ability to pool risks. Most insurance companies – including the very large ones – have a local, national or regional footprint, due to the need to maintain distribution networks and close contact with their customers. Therefore, insurers only mutualize risks on a limited geographical scale. While this level of mutualization is sufficient for smaller risks that occur frequently, it may turn out to be insufficient for certain peak events such as a large natural catastrophe hitting a significant proportion of property insurance policies within a given country. For such a catastrophe, risk mutualization needs to be operated internationally or even globally. This is precisely the role of reinsurers. Contrary to most insurers, reinsurers generally have an international or even truly global footprint, allowing them to pool and mutualize risk exposures worldwide.

This is at the heart of the fundamental value proposition of reinsurance companies: They are able to assume a specific unit of risk at lower capital charges and cost than primary insurers who are limited to mutualization on a national level only. This differential in capital requirements for a particular block of business reduces the cost of risk and constitutes the added value of reinsurance, benefiting all insurance policyholders. It also explains why reinsurance is intrinsically a global industry, relying on diversification of risks across the globe, a wide spectrum of business lines and geographies.

Improving availability and affordability of insurance:

Narrowing protection gaps – Increasing underwriting capacity

By leveraging global diversification reinsurance is an efficient source of capital for direct insurers. Tapping into it increases insurers’ risk underwriting capacity and allows them to issue insurance policies with higher coverage limits, notably for those peak risks which need to be diversified globally and, in the absence of reinsurance protection, could remain completely uninsured. In other words, reinsurance allows insurers to provide more substantial and/or affordable insurance coverage to their individual policyholders, making the latter benefit from the diversification benefit afforded by global risk spreading through reinsurance. By enabling more and less expensive insurance, reinsurers make a vital contribution to narrowing global protection gaps, i.e. the difference between economic and insured losses.

Enabling innovation

In addition to providing cost-efficient capital, reinsurance is also an enabler or an outright source of innovation, not least due to the major players’ proprietary catastrophe modelling capabilities which have spurred the insurability of major natural disasters, for example. Efforts to model cyber exposures are a more recent example. Also, reinsurers play a major role in supporting their customers’ product development, for example in the areas of critical illness and occupational disability. Ultimately, reinsurers’ innovative credentials help expand the limits of insurability, deepening and broadening available insurance cover and, narrowing protection gaps. Having said this, reinsurers face challenges, too, in this context as the frequency of non-modelled risks seems to be rising and climate change trends are blurring the ability to forecast natural disasters.

Disseminating risk knowledge and building risk awareness

Risk knowledge is in its essence, putting a price tag on risks, so society can allocate resources to risk mitigation in the most effective way. As many risks are interconnected and global in today’s world, reinsurers, based on their global pool of data and expertise, are a key resource for tracking these connections and making all stakeholders aware of them. Examples include:

• Longevity, which is influenced by food security, nutrition, climate change, public health care and education. All these influencing factors vary by country and region but are interconnected at the same time. Understanding these interconnections makes it possible to design sustainable pension solutions and provide (real-time) prevention and other services to insureds.
• Renewable energy is key to mitigating climate change. But the sun does not always shine, droughts make hydropower unavailable, and no wind means no energy. Insurance coverages for the lack of sunshine, water or wind smooth revenue streams and make renewable energy projects more attractive to investors. This ultimately accelerates the energy transition.
• Climate change affects the frequency and severity of natural catastrophes, something that the reinsurance industry generally expects and models. For example, 2020 was another active year for natural catastrophes in the U.S. with a record-breaking 30 named storms in the Atlantic and a widespread wildfire season on the West Coast. Insuring farmers, homeowners, businesses, etc against these perils provides economic stability even if disaster strikes, thereby assuring better livelihoods for the growing population on our planet.

By identifying and analyzing emerging risks the reinsurance industry provides a societal service. In an important second step, reinsurance is instrumental in translating these risks into widely available and affordable insurance solutions. As an absorber of peak risks, reinsurance has developed a unique focus and expertise when it comes to scanning for emerging loss accumulations.

• The cyber space has developed into the backbone of modern economies. Today, cyber insurance helps companies to be back online fast, so that the damage from cyber attacks and incidents does not jeopardize their survival.
• All of the above is only possible if risks are identified, assessed for frequency and severity, and analyzed with an eye to their potential for mitigation so that affordable premiums commensurate with the risk can be determined.

The first step in the risk management examples above is the identification of new or “emerging risks”. Emerging risks come with high uncertainty. They have still to be modelled and are potentially unquantifiable, or they evade or challenge current modelling. Examples include risks associated with new technologies like genetic engineering, nanotechnology, robotics or artificial intelligence.

By identifying and analyzing emerging risks the reinsurance industry provides a societal service. In an important second step, reinsurance is instrumental in translating these risks into widely available and affordable insurance solutions. As an absorber of peak risks, reinsurance has developed a unique focus and expertise when it comes to scanning for emerging loss accumulations. Also, reinsurers’ emerging risk research not only enables potential prevention measures but also helps identify limits of prevention and insurability.

Enhancing macroeconomic shock resilience

Re/insurance cover significantly helps economic recovery following a natural catastrophe, as shown in various academic studies (Von Peter et al 2012, Breckner et al 2016, OECD 2018). According to these studies, a higher level of coverage in general is accompanied by significantly better economic performance following a catastrophe. This effect is measured by the long-term effects of large natural disasters on economic activity. If fully insured, these events do not have a significant lasting effect on a country’s GDP level over the longer term. On the other hand, in the absence of insurance cover, there is evidence of a lasting negative effect on economic activity.

Large-scale natural catastrophes have massive economic effects, both direct and indirect. Besides the immediate negative effects resulting from the destruction of production sites, infrastructure, etc., the longer-term consequences should be considered as well. Emerging and developing economies in general are more heavily affected by extreme natural disasters than industrialized countries, not least because their resilience and preparedness levels are (much) lower.

The role of (re-)insurance in limiting the negative implications of extreme events and the resulting macroeconomic costs especially for the most vulnerable countries, is multifaceted. First, given the global scope of reinsurance, affected countries can draw on readily available international resources to pay for losses. As shown before, this risk-bearing capacity can be provided more cost-efficiently than through self-insurance on a national level. Secondly, (re-)insurance provides incentives for lossprevention, e.g. through incentivizing better building standards. And finally, by setting a price tag on insured properties or business activities, insurance mechanisms increase the efficiency of disaster prevention – as opposed to post-event foreign aid inflows.

Contributing to sustainable development – via Reinsurance

By its very nature, reinsurance is an important contributor to achieving sustainable development. By mitigating major losses reinsurers smooth economic volatility and reduce economic shocks. Their extensive expertise uniquely positions them to contribute to the assessment and understanding of new, emerging and changing risks. Furthermore, reinsurers have a long record of driving innovation and the implementation of new technologies such as space technologies (satellites) or, more recently, green tech solutions.

Reinsurers are also well aware of their “corporate responsibility” and are committed to global initiatives such as the UN Sustainable Development Goals (SDGs), the Paris Agreement on Climate Change and many others. Global partnerships for sustainable development as well as voluntary commitments to standards such as those embodied by the UN Global Compact (UNGC), the Principles for Sustainable Insurance (PSI) and the Principles for Responsible Investment (PRI) are common for the reinsurance industry. A good example of cooperation between (re-) insurers and supranational organizations is the production of “Global guidance on the integration of environmental, social and governance risks into insurance underwriting “(UNEPFI PSI 2020).

As major institutional investors, reinsurers’ sustainable investing practices support sustainable development. Given the risk competency of reinsurers, the integration of ESG criteria into the investment process is well established in the industry. The establishment of sustainable investment guidelines is common practice in the investment management of reinsurers as are large-scale investments in renewable energy and sustainable real estate and infrastructure. Reinsurers have taken on innovative sustainable finance instruments such as green bonds. Also, initiatives such as the Net-Zero Asset Owner Alliance are supported by several reinsurers.

Climate change is one of the main causes of sustainability management. Its societal implications are manifold, ranging from physical and economic risks to changing business models and climate-induced migration (Munich Re 2021). The global reinsurance industry has been vocal about climate change and started to explore this phenomenon as early as in the 1970s, accumulating extensive data, knowledge and experience over the past five decades (Munich Re 2015). Reinsurers understand climate risks and are compensated for assuming such risks in order to support recovery efforts after disasters strike by paying claims that help communities to rebuild.

Reinsurers play an important role in helping societies adapt to climate change. They assume a portion of the financial burden of those affected by natural disasters, allowing them to return to their daily lives more quickly after a loss event. This role is particularly relevant for emerging and developing countries which are most vulnerable to natural catastrophes.

In addition to assuming underwriting risk, reinsurers also engage in a number of other activities and support measures that enable a more rapid adaptation to climate change. For example, they share information and provide education to raise awareness of natural catastrophe risks in both the public and private sector. They also assist in designing policy measures to incentivize the development of private sector risk transfer solutions (e.g. through conducive accounting and taxation rules) as well as Public-Private Partnerships such as catastrophe pools. In addition to risk-reducing insurance solutions geared towards loss prevention and adaptation to climate change, reinsurers also act as enablers of climate-friendly and sustainable technologies and support the transition to a low carbon economy. Knowledge and innovative coverage concepts help expand the frontiers of insurability and facilitate the breakthrough of new technologies. Insurance solutions enabled by reinsurance can protect against specific risks, thereby enhancing the appeal of green technologies for investors and strengthening their financing viability. This includes performance guarantees for renewable energy technologies (offshore wind farms and solar parks, for example) and support for hydrogen or methane fuel cell technology.

Conclusions and recommendations

ICIEC has strategically leveraged the international reinsurance market to enhance its operational efficiency and expand its capacity. This prudent approach has strengthened portfolio diversification through effective risk transfer while improving financial flexibility. Notably, the reinsurance cession transfer rate increased from 66% in 2020 to 77% as of 2024, reflecting the continued strong support from the reinsurance market and ICIEC’s ability to optimise risk management by offloading exposures from its balance sheet. The risk transfer strategy also enhances ICIEC’s capacity and ability to support strategic and impactful projects in its Member States.

For reinsurance to benefit the economy and society it needs to operate globally. Global scale and risk diversification allows reinsurers to assume very large and complex risks in an affordable way. As such, reinsurers are a major source for stable and shock-resilient domestic insurance markets. In countries like Chile and New Zealand, for example, global reinsurers generally pay for the lion’s share of earthquake disasters, which otherwise may not be insurable at all, falling on domestic households, businesses and taxpayers in their entirety.

Reinsurance can play its economically and societally beneficial role only if certain basic policies and regulatory conditions are met. A key prerequisite is reinsurers’ unfettered ability to operate on a cross-border basis, i.e. the freedom to provide services. Reinsurers also require the ability to use their worldwide pot of premium to pay for local claims. Restrictions on the free flow of capital, e.g. through deposit requirements imposed on foreign reinsurers, impair their ability to move capital to cover major events which would ultimately drive up the cost of cover. (Source: GRF 2021)

Reinsurance Exposure (USD Mn)

Oman’s economic outlook for 2025 reflects moderate growth, supported by ongoing structural reforms. Both the Ministry of Economy and the IMF estimate real GDP growth of around 2.2%–2.3%. Growth is driven mainly by the non-oil economy, which includes manufacturing, logistics, tourism, and services. These sectors continue to outperform hydrocarbon activities, which remain constrained by OPEC+ production caps.

Preliminary data from Q1 2025 showed GDP expanding by 4.7%, largely fuelled by robust non-oil activity. While crude oil production has been capped, natural gas output has partially offset this decline, helping maintain stability in hydrocarbon revenues. This diversification underscores the success of Oman’s long-term development agenda, which seeks to reduce reliance on oil while cultivating new engines of growth.

Government policy remains firmly anchored in Vision 2040, which emphasizes fiscal discipline, diversification, and structural reform. Fiscal performance has been strong, with surpluses recorded in 2024 followed by only a modest deficit projected in 2025. Public debt has fallen dramatically from a pandemic-era peak of more than 68% of GDP in 2020 to around 35% today, thanks to prudent fiscal management and conservative budgeting.

Monetary policy complements these efforts, focusing on price stability and investor confidence. Oman has one of the lowest inflation rates in the region, helping preserve household purchasing power and reinforcing business sentiment.

The manufacturing sector has become a critical driver of growth, expanding across petrochemicals, food processing, metals, and pharmaceuticals. Meanwhile, Oman’s strategic location at the crossroads of Asia, Africa, and the Middle East supports its transformation into a global logistics hub, underpinned by world-class port and transport infrastructure.

Vision 2040 and Growth Drivers

Oman Vision 2040, launched under the guidance of His Majesty Sultan Haitham bin Tariq, serves as the nation’s long-term blueprint for achieving economic resilience, social well-being, and environmental sustainability. It articulates a clear strategy to transition from an economy historically dependent on hydrocarbons toward one that is diversified, knowledge-based, and globally competitive.

Oman’s development trajectory is guided by Vision 2040 and the Tenth Five-Year Development Plan (2021–2025). Both place emphasis on nonoil sector expansion, foreign investment, and modern infrastructure. Non-oil GDP is forecast to grow by 2.7% in 2025, supported by investments in ports, industrial clusters, and logistics corridors.

Recent reforms, including the Foreign Capital Investment Law, have further liberalised the business environment and encouraged international participation. The Vision 2040 agenda enjoys support from key multilateral institutions such as the IsDB Group, IMF and World Bank, which have commended Oman’s steady progress on fiscal consolidation, legal modernisation, and private sector development.

Progress to Date

• Oman has already diversified its non-oil revenues to account for more than 30% of GDP, supported by strong performance in logistics and manufacturing exports.
• The successful issuance of green sukuk and the establishment of frameworks for Public-Private Partnerships (PPPs) demonstrate tangible steps toward achieving fiscal and environmental goals.
• The roll-out of initiatives under the National Energy Strategy 2040 confirms Oman’s leadership in green transition within the Gulf Cooperation Council (GCC).

Creditworthiness has improved significantly. In 2025, Moody’s upgraded Oman to Baa3 and S&P confirmed BBB-, both with stable outlooks. These investment-grade ratings reflect strong fiscal discipline, lower debt ratios, and greater policy predictability.

Renewable energy is emerging as another major pillar. Large-scale solar and wind projects are underway, alongside ambitious plans in green hydrogen, positioning Oman to become a regional leader in sustainable energy. These initiatives align with global climate commitments while also generating new industries and long-term employment opportunities.

Despite ongoing global uncertainties, including volatile oil prices, geopolitical risks, and supply chain disruptions, Oman continues to deliver steady growth. Its ability to adapt to shocks highlights growing institutional capacity and a clear commitment to reform continuity.

• Digitalization of government services to increase efficiency and transparency.
• SME empowerment and entrepreneurship support to foster privatesector-led growth.
• Labour market reforms to improve productivity and attract talent.
• Human capital investment, with a focus on education, skills, and youth employment.

Operational resilience has been evident in Oman’s capacity to maintain policy discipline despite volatile global conditions. Adequate foreign reserves and moderate debt sustainability risk provide buffers against external shocks. This resilience underpins investor confidence and strengthens Oman’s reputation as a stable destination for long-term projects.

Islamic Finance Proposition and Sukuk Developments

Islamic finance has become one of Oman’s fastest-growing financial segments. Shariah-compliant banking now represents over 16% of total sector assets, with steady growth expected as new players enter the market.

Sukuk issuance has expanded rapidly, attracting both domestic and international investors. Major issuers such as Energy Development Oman (EDO), Omantel, and the Oman Electricity Transmission Company have successfully tapped Sukuk markets to finance infrastructure and energy projects. This demonstrates the sector’s ability to mobilise long-term funding while aligning with ethical investment preferences.

Beyond traditional Sukuk, Oman has embraced Commodity Murabaha and Islamic trade finance solutions, particularly in manufacturing and logistics. Innovative instruments, including green and sustainabilitylinked Sukuk, are gaining traction, placing Oman at the forefront of Islamic financial innovation in the region.

By broadening funding channels and deepening the capital market, Islamic finance is helping diversify Oman’s financial system and support national development priorities.

Infrastructure and Project Pipeline

Oman maintains a strong pipeline of strategic projects designed to enhance connectivity, industrial capacity, and renewable energy integration. Key initiatives include:

• Expansion of Sohar, Duqm, and Salalah ports, creating world-class maritime and logistics hubs.
• Development of new highways and rail networks to improve regional connectivity.
• Modernisation of airports to accommodate rising passenger and cargo volumes.
• Upgrading of electricity transmission grids, supporting renewable integration and industrial growth.

Special Economic Zones (SEZs), particularly in Duqm and Sohar, are attracting international investment through public-private partnerships and targeted incentives. These clusters are set to become anchors of Oman’s diversification strategy, boosting export competitiveness and job creation.

Oman’s relationship with the IsDB Group

Oman has been a founding member of the Islamic Development Bank (IsDB) Group since 1974, with a subscribed capital share of ID 185 million (≈USD 530 million). Over the decades, Oman has received more than USD 2.5 billion in cumulative approvals from the Group, financing projects across transport, health, water, social infrastructure, and industrial development. These engagements are closely aligned with Vision 2040, supporting diversification, private sector growth, and sustainable development.

ICIEC’s Engagement with Oman

Oman joined ICIEC in 2009 and has since developed a strong working relationship with the institution. ICIEC provides risk mitigation and credit enhancement tools that support both sovereign and private transactions in Oman. Coverage spans short-term trade credit, medium-term investment guarantees, and customized products for infrastructure and energy projects.

Selected Case Studies

• Duqm Port Project (2018):

ICIEC provided USD 114 million in reinsurance cover to Atradius, supporting the construction of a liquid bulk berth terminal in the Duqm Special Economic Zone. This project strengthened Oman’s logistics competitiveness by reducing transport distances and costs and enhancing export potential.

Sohar Port Expansion (2025):

ICIEC signed a USD 40 million policy with Royal Boskalis for dredging and development works at the Sohar Port and Freezone South Expansion. The project will deepen navigation channels and upgrade jetty infrastructure, positioning Sohar as a leading regional maritime hub. It also supports the launch of MARSA LNG, the Middle East’s first LNG bunkering facility, underscoring Oman’s commitment to clean energy solutions. ICIEC’s coverage enabled smoother access to financing and ensured project bankability.

Through such transactions, ICIEC plays a catalytic role in mobilising foreign investment, promoting sustainable trade, facilitating Oman’s broader diversification strategy, and contributing directly to Vision 2040 objectives.

Opportunities for deeper ICIEC–Oman collaboration are significant:

Green and sustainable projects: ICIEC can support Oman’s ambitious renewable energy and green hydrogen agenda, particularly in attracting global investors to solar, wind, and hydrogen clusters.

PPP frameworks: As Oman advances public-private partnerships in ports, utilities, and logistics, ICIEC’s guarantees can help mobilise Foreign Direct Investment (FDI) and support the financial sustainability of these ventures.

Export diversification: With non-oil exports already accounting for over a third of Oman’s trade, ICIEC’s credit insurance products can further expand access to new and higher-risk markets in Africa and Asia.

SME support: By tailoring risk mitigation solutions for small and medium exporters, ICIEC can contribute directly to job creation and private sector empowerment, both key pillars of Vision 2040.

Outlook and Strategic Implications

Oman’s economy is projected to grow at 2.4%–3.4% in 2025, accelerating to as high as 3.7% in 2026 as OPEC+ production caps are gradually eased and non-oil momentum builds further

Key growth drivers include:

• Ambitious investments in logistics and industrial clusters.
• Expansion of renewable energy, with a special focus on green hydrogen.
• Digital transformation and SME development.
• Continued reforms to the business environment and labor market.

Fiscal and external buffers will remain strong, supported by cautious budgeting and a policy of channelling hydrocarbon surpluses into debt reduction and infrastructure upgrades. Public debt is projected to remain below 35% of GDP, compared to more than 68% just five years ago, a clear sign of reform success.

Risks persist, including global oil market volatility, potential trade disruptions, and regional geopolitical uncertainties. However, the growing share of non-hydrocarbon exports (over one-third of the total), coupled with steady gains in manufacturing and services, provides important safeguards.

Over the medium term, Oman is set to redefine the Gulf development model—transitioning from resource dependence to a balanced, innovation-driven economy. Strategic partnerships with multilateral institutions such as the IsDB Group will continue to play a pivotal role, ensuring access to risk mitigation tools, strengthening investor confidence, and accelerating the realization of Vision 2040 objectives.

Conclusion

Oman’s economic transformation is gaining traction. The combination of fiscal discipline, strong credit ratings, growing Islamic finance, and an ambitious infrastructure agenda positions the Sultanate for sustainable and inclusive growth. With Vision 2040 as its compass and active partnerships with the IsDB Group, particularly ICIEC, Oman is steadily emerging as a regional benchmark for economic sustainability and diversification.

Following years focused on reconstruction and stability, the Republic of Iraq is working to transition its economy from heavy dependence on oil exports toward a more diversified and sustainable growth model. The government’s development priorities include strengthening the private sector, improving infrastructure such as electricity and transportation, and modernising public financial management. Investment in agriculture, manufacturing, and digital services is seen as essential to create jobs for Iraq’s young and rapidly growing population. Anticorruption reforms and regulatory improvements are also central to attracting foreign direct investment and rebuilding investor confidence. This transition agenda is guided by Iraq’s Vision 2030 and translated into action plans through the National Development Plan (NDP) 2024– 2028, which sets medium-term priorities across infrastructure, public services, and institutional reform. Long-term economic stability depends on fiscal reform, human capital development, and reducing vulnerability to fluctuations in global oil prices.

Hydrocarbons continue to play a central role in Iraq’s economy, providing the bulk of fiscal revenues and foreign exchange earnings. As a result, economic performance remains influenced by oil prices and production levels. At the same time, the authorities are increasingly focused on strengthening the foundations for broader-based growth, supported by gradual reforms and targeted investment.

Iraq enters this phase supported by stable financial foundations. Foreign exchange reserves remain sizeable, and external debt service obligations are relatively low. These conditions provide flexibility to manage volatility and support medium-term priorities, particularly in areas that enhance productivity, service delivery, and private sector participation.

At the institutional level, progress has been made in streamlining budget approval and improving execution rates, particularly for priority infrastructure programmes. Continued efforts to strengthen coordination, improve administrative effectiveness, and support implementation capacity are helping to sustain reform momentum.

From a macroeconomic perspective, growth prospects remain closely linked to developments in the oil sector. Medium-term projections point to gradual strengthening supported by public investment and infrastructure expansion; fiscal balances are expected to remain expansionary in the near term and the external position may face moderate pressure under lower oil price scenarios. Nevertheless, foreign exchange reserves and the exchange rate framework provide important buffers that support macroeconomic stability.

Infrastructure continues to sit at the heart of Iraq’s development priorities, with capital increasingly directed toward large-scale transport, logistics, power, and gas projects. Flagship initiatives such as the Grand Faw Port and the Development Road Corridor are progressing in phased implementation, with the strategic objective of positioning Iraq as a regional trade and transit hub linking the Gulf to Turkey and Europe. Parallel investments in gas capture, power generation, and grid rehabilitation—alongside emerging renewable energy projects—are aimed at strengthening energy security and improving service reliability. While public– private partnership (PPP) activity remains at a developmental stage, ongoing institutional and regulatory reforms are gradually laying the groundwork for broader private sector participation.

Infrastructure continues to sit at the heart of Iraq’s development priorities, with capital increasingly directed toward large-scale transport, logistics, power, and gas projects. Flagship initiatives such as the Grand Faw Port and the Development Road Corridor are progressing in phased implementation, with the strategic objective of positioning Iraq as a regional trade and transit hub linking the Gulf to Turkey and Europe.

Islamic finance is also emerging as a complementary channel to support development financing. In 2023, Iraq’s parliament approved a sukuk law covering both sovereign and corporate issuance, marking an important institutional milestone. Building on this framework, the Ministry of Finance issued reconstruction sukuk under the “Sukuk Al-Imar” programme in January 2024, totalling IQD 2 trillion (approximately USD 1.5 billion). The issuance, distributed through authorised banks and tradable on the Iraqi Stock Exchange, helped broaden domestic participation and support the gradual development of Shariah-compliant capital markets.

ICIEC will continue to play a key role in supporting Iraq’s economic transition by mitigating political and commercial risks that often deter foreign investors and exporters. ICIEC’s Shariah-compliant investment and export credit insurance will help international financiers and companies enter the Iraqi market with greater confidence. By covering risks such as expropriation, currency inconvertibility, breach of contract, and political violence, it facilitates foreign direct investment in priority sectors like infrastructure, energy, agriculture, and manufacturing.

ICIEC also supports Iraqi banks and exporters by enhancing their creditworthiness, enabling access to trade finance and integration into global markets. Through these risk-mitigation tools, ICIEC will continue to contribute to private sector development, economic diversification, and sustainable growth in Iraq.

ICIEC and the IsDB Group conducted a mission to Iraq in 2025 to engage with government stakeholders and discuss priority sectors where structured support could add value. These discussions focused on establishing a practical framework through which IsDB Group institutions can extend financing and advisory support, particularly in infrastructure and other strategic sectors aligned with national development priorities.

In 2025, ICIEC also supported Iraq’s critical power infrastructure project, Karbi Substations, a major transmission upgrade that will strengthen electricity supply and energy security for Baghdad, Karbala, and Basrah. The project insured by Euler Hermes (Germany) and financed by a consortium led by Standard Chartered Bank, covers the turnkey delivery of three 400/132/11kV Gas Insulated Switchgear (GIS) substations by Siemens Energy Global GmbH & Co. KG. ICIEC’s reinsurance cover amounted to EUR 99 million, supporting a total insured amount of EUR 336 million, and helping mobilise international financing for infrastructure delivery. Once completed, the substations are expected to expand transmission capacity by 4,500 MVA, improve grid stability and reliability for households and industry, and contribute to SDG 7, SDG 8, SDG 9, SDG 11, and SDG 13 through more resilient and efficient electricity infrastructure.

Iraq’s economic outlook remains closely linked to developments in the global oil market, with fiscal and external balances highly sensitive to fluctuations in crude prices and production quotas. While elevated oil revenues can support public spending and reconstruction, volatility poses risks to budget stability and long-term planning. In the near to medium term, growth is expected to be driven by a combination of oil sector performance and gradual recovery in non-oil activities such as construction, trade, and agriculture. Structural reforms aimed at improving the business climate, strengthening public financial management, and expanding private sector participation will be critical to sustaining momentum.

ICIEC remains committed to supporting Iraq’s evolving development agenda through targeted risk mitigation and structured engagement across sovereign and private sectors.

Africa faces major financing gaps which are constraining its progress on many fronts. The continent needs USD 1.3 trillion annually to achieve the Sustainable Development Goals (SDGs) by 2030. The need to mitigate and adapt to a changing climate and meet global commitments on climate action adds to the funding gap. To finance their Nationally Determined Contributions (NDCs) under the Paris Climate Agreement, African countries require USD 277 billion per year until 2030, yet current climate finance flows to Africa amount to only USD 30 billion annually, concentrated in a few countries.

African countries have emerged from the COVID-19 pandemic with worsened fiscal balances and rising debt, just when they need to invest more in national development. There is an urgent need to broaden the range of financing available to Africa for both sovereign and private sector entities and diversify beyond fiscal and development finance sources.

African countries’ ability to access international debt capital markets has been constrained by several factors including heightened risk aversion from global investors towards Emerging Markets and challenging macro-economic conditions. As a result, international debt capital markets were shut for African issuers and the few investors with appetite to Africa are requesting credit enhancement and de-risking solutions as a pre-requisite to lending to African borrowers.

The African Development Bank Group (AfDB Group)’s Ten Year Strategy 2024-2033 places significant emphasis on the mobilisation of finance particularly from private sector capital. This aims to address Africa’s development financing needs in an increasingly challenging global aid and regional operating landscape. Leveraging its AAA rating and international standing, the AfDB Group is deploying its guarantee instruments to crowd in institutional investors and commercial banks and assist African borrowers access development resources on international debt capital markets.

By mitigating credit and political risks, guarantees enhance the bankability of projects and crowd in investors who might otherwise be reluctant to engage in African markets. Guarantees increase financing volumes and improve financing terms available for sovereign and non-sovereign borrowers including access to longer maturities and grace periods, customised repayment profiles and lower borrowing cost. The guarantee instruments have been deployed under both the AfDB and the African Development Fund (ADF), the concessional arm of the AfDB Group) windows.

Since 2014, the AfDB Group has executed 15 guarantee transactions valued at USD 3.7 billion, which have mobilised approximately USD 6 billion in private capital across more than 10 countries. In 2025 alone, over EUR 1.2 billion in guarantees were approved, underscoring the growing importance of guarantees in the Bank Group’s strategy for scaling development impact. Building on previous success in deploying guarantee transactions, 2025 saw further innovations. The ADF utilised for the first time, its partial credit guarantee under a Guarantor-of-Record structure combining country allocation and credit insurance to offer a higher guarantee amount. With such structure, the Republic of Togo was able to raise in one transaction almost 4 times its 3-year allocation. On the side of the AfDB window, the Bank achieved its first repeat guarantee transaction for the Republic of Côte d’Ivoire through the second Sustainable Financing Framework based guarantee and the first Sustainability-Linked guarantee (the latter featuring a guarantee fee reduction mechanism if Sustainability Performance Targets are met) under the private sector window in support of Mota Engil Africa. The projected pipeline for 2026 anticipates over USD 2 billion to be mobilised from commercial lenders via guarantees.

Guarantees offer opportunities to collaborate with various stakeholders including lenders, coguarantors and insurers. ICIEC is a partner of choice for AfDB. This is enshrined in the longterm partnership between AfDB and the Islamic Development Bank (IsDB) formalized since 1987 and the collaboration under the African CoGuarantee Platform (CGP) for which both AfDB and ICIEC are founding members.

The AfDB and ICIEC share the common goal to create synergies and scale trade and investment in Africa. In that perspective, they have started a knowledge-sharing initiative to introduce their respective staff to the financial products offered by the two institutions. The first event was held in September 2024 and allowed AfDB investment officers to better understand ICIEC’s Sukuk Insurance product. Following the success of this event, AfDB organized on 16 September 2025 a dedicated session with staff of IsDB Group to present its guarantee products and showcase how these instruments can be leveraged to mobilise financing at scale. Through practical examples and case studies, the session showcased AfDB’s experience in deploying Partial Credit Guarantees, Partial Risk Guarantees, and other innovative risk-sharing instruments. The aim is to deepen collaboration between AfDB and IsDB Group in leveraging guarantees as a catalytic tool to unlock investment opportunities for Africa.

One of the highlights of the session was the collaboration between AfDB and ICIEC in 2023 that helped Côte d’Ivoire mobilise an ESG loan from commercial banks. With the support of a EUR 194 million ICIEC Insurance Policy, AfDB was able to increase its guarantee cover from EUR 206 million to EUR 400 million allowing the country to raise EUR 533 million for a 15-year maturity at low pricing. The proceeds of the loan are used in line with the country’s sustainable financing framework (SFF). The SFF, as in a number of AfDB guarantee transactions, is developed by the country in line with international best practices and is externally verified by a reputable Second Party Opinion Provider. It clearly and transparently defines eligible projects and expenses, selection criteria, project monitoring, evaluation and reporting, verification and audit, liquidity management, the SFF institutional set-up and management process. The Côte d’Ivoire case further demonstrates how layered risk mitigation can generate catalytic multiplication: insurance enhanced guarantee coverage, which unlocked larger financing volumes, extended maturities to 15 years, reduced borrowing costs, and anchored the transaction firmly within an ESG-aligned framework.

In summary, guarantees and BSO are catalytic instruments that enable AfDB and ICIEC opportunities to collaborate and advance private capital mobilisation and de-risking in support of sustainable development projects across Africa. Leveraging their longstanding partnership and the African Co-guarantee platform

As a result, the Côte d’Ivoire transaction supported by AfDB and ICIEC received external recognition, winning the ESG loan deal of the year at the 2024 Bonds, Loans and ESG Capital Markets Awards. Beyond the accolade, the transaction underscores the strong complementarities between AfDB and ICIEC in advancing private capital mobilisation and effective derisking across their common Member States.

In addition to guarantees, AfDB and ICIEC can also collaborate through balance sheet optimisation transactions (BSO). BSO are risk transfer transactions used by the AfDB to achieve three main objectives: (i) free up risk capital and increase lending capacity especially in times where the AfDB must play a counter cyclical role; (ii) address constraints on the prudential ratios to safeguard safety margins on key rating agency ratios and protect the AfDB’s AAA rating which underpins low funding costs passed onto borrowers; (iii) diversify and crowd in financial investors into African development finance. BSO transactions can be executed on a portfolio basis but also project-per-project on a single obligor risk basis. Since the 2015 G20 call to multilateral development banks (MDBs) to use the ‘billions’ in Official Development Aid to mobilise ‘trillions’ of investments through more efficient use of existing risk capital, the AfDB has streamlined BSO into its operations. The use of BSO has been further recommended in the 2022 Capital Adequacy Framework Recommendations’ report to G20.

The AfDB has been a pioneer in BSO innovations with notably the first MDBs Exposure Exchange Agreement in 2015 where the Bank exchanged with IBRD and IADB, USD 4.5 billion of its exposure to its top 9 African countries (reduction of exposure on borrowing countries) against equivalent exposure to 13 Latin American and Asian countries (diversification of exposure towards non-borrowing countries). An exposure exchange is a useful balance sheet optimization instrument for managing country concentration risk and freeing more lending capacity for constrained countries. Following the success of the first exposure exchange transaction, the AfDB has since executed 3 other exposure exchange transactions freeing around USD 12 billion in additional lending capacity for the benefit of African borrowers.

The AfDB also initiated in 2018 its Room to Run (R2R) programme consisting of BSO portfolio transactions aimed at addressing specific constraints on prudential metrics, improving AfDB’s credit risk profile and reducing risk capital consumption to free up capacity to finance new projects in Africa. As part of R2R, the AfDB executed in 2018 the first MDB Synthetic Securitization Transaction (SST) on a USD 1 billion reference portfolio of seasoned pan-African project finance loans and lines of credit to financial institutions. The SST freed up to USD 650 million in additional headroom for new loans and guarantees. Together with the SST, the AfDB also executed a portfolio Credit Insurance on a USD 500 million reference portfolio of non-sovereign financial sector loans to create USD 465 million in additional headroom. The latest transaction in the R2R programme is a USD 2 billion synthetic risk transfer where UK’s Foreign, Commonwealth & Development Office (FCDO) and private insurers covered the AfDB’s outstanding sovereign exposures to relevant regional Member States in October 2022. It has provided an estimated additional USD 2 billion in new lending capacity for climate finance.

In summary, guarantees and BSO are catalytic instruments that enable AfDB and ICIEC opportunities to collaborate and advance private capital mobilisation and de-risking in support of sustainable development projects across Africa. Leveraging their long-standing partnership and the African Co-guarantee platform, the two institutions can achieve greater impacts by unlocking higher financing volumes more quickly for the benefit of their common Member States. Scaling these instruments will be critical to closing Africa’s financing gaps and meeting the continent’s longterm development and climate ambitions.

The global climate crisis requires investment on an unprecedented scale for both mitigation and adaptation. At the centre of this challenge lies the energy transition, shifting from fossil fuels to renewable and clean technologies. Yet in many developing and climate-vulnerable economies, mobilising private capital faces major headwinds due to perceived and real risks.

Among the institutions seeking to address this gap is the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the insurance arm of the Islamic Development Bank (IsDB) Group and a committed Berne Union member. Through its Shariah-compliant credit and political risk instruments, ICIEC is working to de-risk investments in renewable energy and climate-resilient infrastructure in its 50 member states. Over the past year, ICIEC has refined its approach to climate finance, introducing new risk-sharing mechanisms. These initiatives aim to make climate projects more bankable by addressing constraints that limit private investment.

Global risk landscape: Scale and barriers

According to the International Energy Agency, annual clean energy investment must reach
USD 4.5 trillion by the early 2030s to remain on track for net-zero by 2050. Meanwhile, adaptation finance needs in developing countries could hit USD 340 billion annually by 2030. Public funds alone are not up to meeting this demand.

Yet for private investors, particularly in the markets where ICIEC operates, political and regulatory risks ranging from shifting policy frameworks to permitting delays continue to stall critical projects. Credit risk is another constraint, with concerns about off-taker solvency and sovereign payment reliability undermining project bankability. Currency convertibility and performance risks around newer low-carbon solutions such as green hydrogen and advanced storage add further layers of uncertainty. All of this is compounded by physical climate risks, including severe weather events that directly threaten infrastructure and livelihoods, and by transition risks such as the impacts of stranded assets and market shifts on economies that rely on traditional sectors. These risks deter investors and escalate capital costs, threatening the viability of essential climate projects.

ICIEC’s climate change framework

In 2024, ICIEC launched its comprehensive Climate Change Policy, fully aligned with the Islamic Development Bank Group and Paris Agreement principles and integrating sustainability across operations, products, risk management, capacity-building, and communication.

The policy’s pillars include improving internal operations by reducing ICIEC’s carbon footprint, optimising travel, and digitising workflows; prioritising insurance and reinsurance for renewable energy, circular economy, disaster risk management, and resilient infrastructure; embedding climate risk management across the entire risk framework; building capacity via training and knowledge-sharing; active engagement in the InsuResilience Global Partnership (IGP); and enhancing communication and transparency through Annual Sustainability and Development Effectiveness Reports.

De-risking and innovating in climate investment

ICIEC surpassed its target of dedicating 13% of total insured business to climate-friendly initiatives, reflecting a shift in portfolio composition towards sustainable sectors. As a multilateral insurer focused on development, ICIEC deploys and adapts robust, tailored solutions. Political risk, credit, and project finance insurance represent ICIEC’s core products for addressing investor concerns over expropriation, breach of contract, payment default, and currency inconvertibility, all of which continue to weigh heavily on clean energy projects in emerging markets. Through co-insurance and reinsurance partnerships with ECAs and MDBs, the corporation also extends capacity for larger and more complex transactions.

Recent projects highlight the measurable impact these tools are having. In Egypt, ICIEC’s provision of USD 68 million in equity insurance across four solar plants in the Benban Solar Park, one of the world’s largest photovoltaic complexes, helped attract international investors. The Benban project has enabled hundreds of megawatts of clean power and stimulated local job creation and supply chain development. In Senegal, ICIEC’s EUR 103 million insurance supported the installation of 50,000 off-grid solar-powered streetlamps in rural communities, boosting safety, extending productive hours, fostering rural economic growth, and contributing substantially to Senegal’s climate and energy goals. And in Türkiye, approximately USD 80 million in reinsurance supported the expansion of solar and wind energy, diversifying the national energy mix, improving energy security, and creating sustainable employment.

Circular economy and urban sustainability

Waste management and urban infrastructure are often overlooked in climate finance but vital for reducing emissions and improving quality of life. ICIEC’s cover for the Sharjah Waste-to-Energy plant, the region’s first commercial facility of its kind, helped divert more than 300,000 tonnes of waste from landfill and avoid roughly 460,000 tonnes of CO₂ emissions annually, while advancing Sharjah’s zero-waste target and creating green jobs.

In Saudi Arabia, a Shariah-compliant reinsurance facility of USD 360 million, arranged jointly with Atradius Dutch State Business, enabled global participation in one of the world’s largest urban transit developments. This transformative PPP modernises Riyadh’s transportation, cuts emissions and traffic congestion, and supports KSA Vision 2030’s urban sustainability objectives. Both cases highlight how risk-sharing can catalyse investment in large-scale initiatives with measurable environmental and social returns.

Resilience, water and food security

Across water and agricultural sectors, ICIEC has used political and credit insurance to support adaptation and livelihoods. In Côte d’Ivoire, EUR 107 million in cover facilitated the development of climate-resilient water infrastructure, enhancing health outcomes and agricultural productivity for millions. In Egypt, insurance for strategic desalination and sanitation projects supported adaptation to water scarcity in a changing climate. And in the West Bank, ICIEC partnered with MIGA to provide reinsurance cover for investment in seven date farms, packaging, solar energy, and cold storage. The project is a lifeline for local employment, women’s empowerment, and economic resilience through international export of premium Medjool and Barhi dates – all in a climate-stressed, fragile district.

Driving impact through partnerships and Islamic finance

In 2024, ICIEC inked 138 partnership agreements and deepened its collaboration with the IsDB Group entities, ICD (private sector), ITFC (trade), and major innovators like Masdar and IRENA through the Energy Transition Accelerator Financing programme. These alliances support climate finance mobilisation, technical innovation, and knowledge exchange across member states. The corporation is extending the reach of Islamic finance with Shariah-compliant solutions such as the Green/Sustainability Sukuk Insurance Policy. Green and sustainability-labelled sukuk now represent around 5% of total issuance, and volumes continue to grow as standards mature. The wider Islamic finance sector, valued at over USD 4 trillion, remains an immense but under-utilised source of capital for climate projects.

Scaling through project finance and PPPs

In 2024, ICIEC expanded its risk solutions to cover non-payment risks in project finance and public-private partnerships (PPPs), recognising their growing importance in scaling sustainable infrastructure. By combining public and private capital, PPPs enable risk-sharing and technical collaboration essential for the delivery of energy, water, and transport projects. As transition projects grow in scale and complexity, PPPs are emerging as the preferred model for mobilising foreign direct investment and driving innovation in emerging economies.

Providing the ‘oxygen’ for a sustainable future

Mobilising private capital to address the climate crisis remains one of the defining challenges of the years ahead. With an AA- rating and a developmental mandate focused on the most vulnerable regions, ICIEC is enabling member states to transform climate ambition into bankable, insurable reality. Through collaboration and its evolving de-risking toolkit, ICIEC is helping to build resilient, low-carbon economies; its recent initiatives illustrate how such models can align commercial and developmental objectives, drawing in private investment. These experiences point to the broader potential of partnership-based finance in building a greener, more equitable future.