Banks have historically relied on distribution of their project finance risks through syndications, the use of club deals, and the credit default swap (CDS) market, among other means. But each of these techniques has its own limitations and disadvantages — including a high cost. Non-payment insurance is an alternative or compliment to these options.
Non-payment insurance policies (NPI) offered by diversified, multi-line insurance companies are a viable source of investment-grade, unfunded risk capacity, and protection for project finance lenders.
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