Sovereign's US$50 million reinsurance policy supports the IDB's first private sector convertibility/transferability guarantee for Brazil, issued for a US$100 million loan to VBC Energia S.A. (VBC). The loan to VBC, provided by a syndicate of commercial banks, was made to finance the expansion and modernization of two of Brazil's electricity distribution companies, Companhia Paulista de Força e Luz, S.A. and Rio Grande Energia, S.A. The US$100 million IDB guarantee of that loan covers risks associated with currency inconvertibility, transferability and funds expropriation. Under the reinsurance policy, Sovereign assumes a portion of the guarantee risk.
Use of reinsurance is one way in which IDB seeks to leverage its resources and enhance its capabilities to guarantee private sector transactions in its member countries. The reinsurance contract for this project will be a model for other similar reinsurance contracts between the IDB and private sector insurers.
Mr. Hiroshi Toyoda, Manager of IDB's Private Sector Department, noted that this is a groundbreaking transaction that will allow the IDB to better support private sector operations in the IDB's member countries throughout Latin America and the Caribbean. "We are delighted to be working with Sovereign as they are one of the world's leading political risk insurers and have the experience and financial strength to complement our private sector operations."
Price Lowenstein, President and Chief Executive Officer of Sovereign, commented that he was "extremely pleased about the opportunity to support the IDB's private sector operations. Sovereign works with financial institutions and bilateral and multilateral agencies on a global basis, and we are very proud to be the first private sector underwriter to reinsure the IDB. This is another important first for Sovereign."
The Inter-American Development Bank was established in 1959 to help accelerate economic and social development in Latin America and Caribbean. With an active loan portfolio of $49 billion and 46 nations as members, it is the largest and the oldest regional multilateral development institution. In 1995, the IDB was authorized to lend up to five percent of its ordinary capital resources to the private sector, complementing its
lending in direct support of economic and social development. Additional information is available on the IDB's website: www.iadb.org.
Sovereign is a specialized political risk insurer and reinsurer based in Bermuda. Sovereign's portfolio exceeds $4 billion of exposure spread over 60 emerging markets. Sovereign's clients include financial institutions, national export credit agencies, multilateral institutions and multinational corporations. Sovereign is a joint venture between XL Insurance Ltd, a wholly-owned subsidiary of XL Capital Ltd (NYSE: XL) and ACE Bermuda Insurance, Ltd., a wholly-owned subsidiary of ACE Limited (NYSE: ACL). Additional information is available on Sovereign's website: www.sovereignbermuda.com.
Media Contact:
Price Lowenstein
(441) 296-4279
svnpl@ace.bm