US DFC and World Bank's MIGA to set up political risk insurance for Ukraine fund

WASHINGTON, June 25 - The U.S. International Development Finance Corporation has agreed with the World Bank's guarantee arm MIGA to create a political risk insurance framework for a U.S.-Ukrainian reconstruction investment fund.

The agreement, signed on Thursday on the sidelines of a Ukraine recovery conference in Gdansk, Poland, will help catalyze and support opportunities for private sector investment in Ukraine in connection with the fund’s investments, the DFC said in a statement.

The U.S.-Ukrainian fund, set up under a critical minerals deal signed between the U.S. and Ukraine a year ago, is focused on five strategic sectors, including minerals and energy. Ukraine continues to fight Moscow's full-scale invasion launched in February 2022.

Approval of a second project is expected in the coming weeks, Ukraine has said.

DFC Chief of Staff Conor Coleman said the agreement would ensure that the DFC could mobilize additional private investment vehicles alongside joint projects that the U.S. agency and the Ukrainian government are pursuing under the U.S.-Ukraine Reconstruction Investment Fund.

That, in turn, he said, would give investors the "confidence to pursue high-impact opportunities in Ukraine," without providing any further details.

Political risk insurance is a specialized type of coverage that protects businesses, investors and lenders against financial losses caused by adverse government actions, political instability or geopolitical turmoil.

"This is an effort by DFC and us together to .. reduce the risk so that the private sector can feel confident about the opportunity to invest in Ukraine’s future," World Bank President Ajay Banga said at the signing.

Ed Mountfield, vice president and chief financial officer of the World Bank's Multilateral Investment Guarantee Agency, who signed the deal with Coleman, said the war-risk coverage would help mobilize private capital investments and strengthen Ukraine's overall business environment.

Ukraine Economy Minister Oleksiy Sobolev told the event that the next projects would be approved this year, and a big facility was needed to de-risk those investments. REUTERS