Insurance cover can be applied to components of a project or the entire project to protect parties from various risks, including political and security risks and financial risks. International financial institutions can play an important role in catalyzing private sector investment by covering such insurance costs, which may sometimes be prohibitively expensive.

Instrument category

Risk mitigation instruments

Implementation status

Moderate - tried and tested

Enabling conditions and success factors
  • Applicable law may require insurance to be obtained locally, in which case the project company will seek to reinsure those risks internationally to get higher-quality insurance protection.
Instrument benefits
  • Enables private sector confidence in contexts of higher political insecurity or commercial risks.
Challenges and risks to implementation
  • Local law may limit the extent to which reinsurance can be used.

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