Multilateral Investment Guarantee Agency, MIGA

Multilateral Investment Guarantee Agency, also known as MIGA is an international financial institution of World Bank Group that offers credit guarantees, political risk insurance and foreign direct investments. These guarantees help in raising funds on a macro level. MIGA is governed by all its members who vote for each resolution and determining its objectives. It has its own executive leadership which looks after its daily operations. Just like any other company, its members too are its shareholders who have a right o vote on important matters. MIGA's operations are checked and assessed by World Bank Group's Independent Evaluation Group.

 

MIGA has a wide variety of products and some of which are:
 

1. Political Risk Insurance for War, Terrorism and Civil Disturbance

This offers protection against loss from, damage to, or disappearance of tangible assets caused by political acts of war or civil disturbance. In case of tangible goods, MIGA pays investor's share in the lesser of the replacement cost including cost of repair or the damaged assets and lost assets or their book value incase they're not being replaced or repaired. Momentary business interruption can also be integrated upon a call for from the investor and would cover a temporary but absolute cessation of operations due to loss of assets or unduly perilous conditions in the host country, which consequence in a temporary leaving or denial of use. For short-term business interruption, MIGA pays inescapable ongoing expenses and extraordinary expenses linked with the restart of operations and lost business earnings or, in the case of loans, missed payments.

2. Political Risk Insurance for Expropriation

This is a product that offers protection against losses occurring from actions of the state that reduce, abolish, ownership of, control over or rights to the insured investment. This product helps investors i.e. insurers from with hunting by the state by providing insurance services. Insurance can be availed here for a short time period as well. When all the equity share capital of a shareholder is expropriated, claim amount here is decided by the net book value of the insured investment. In case of expropriation of funds, MIGA covers the blocked amount. In case of loans and loan guarantees, MIGA covers the principle amount and any accrued/unpaid interest amount.

3. Political Risk Insurance for Breach of Contract

This product offers protection against losses caused by breach of terms of contract by the government of a state, to an investor. In case where the aggrieved investor opts for arbitration to claim the money and he does not succeed in getting the money and an impasse is created because of the government, MIGA will protect the investor by paying him out of his insurance. For non-payment of an award, MIGA pays the investor's interest in the award. For denial of recourse, MIGA pays the investor's interest in the amount which, according to MIGA's maintainences determination, the host government would have to disburse to the investor pursuant to the contract. In either case, MIGA's reimbursement is capped by the amount of guarantee affirmed in the guarantee contract.

 

 

4. Political Risk Insurance for Currency Inconvertibility and Transfer Restriction

MIGA's Currency Inconvertibility and Transfer Restriction service provides protection against losses arising from an investor's inability to legally convert local currency (capital, interest, principal, profits, royalties, and other remittances) into hard currency and/or to transfer hard currency outside the host country where such a state of affairs consequences from a government move or failure to act. Currency depreciation is not covered here. In the event of a claim, MIGA pays compensation in the hard currency specified in the contract of guarantee.

5. Credit Enhancement services for non honoring of financial obligations

In case any person suffers a loss because of dishonor of financial obligations from a contract, by the state or a state owned institution, MIGA provides protection against losses arising from such dishonor. Arbitral award is not necessary to avail this product of MIGA. Compensation here includes insured principle amount and any accrued or unpaid interest amount.

MIGA provides insurance services for cross-border investments made by a MIGA member country into a developing member country. In certain cases, the agency may also insure an investment made by a national of the host country, provided the funds instigate from outside that country. Corporations and financial institutions too are eligible for coverage if they are either incorporated in, and have their principal place of business in, a member country or if they are majority-owned by nationals of member countries. A state-owned company is eligible if it operates on a commercial basis. An investment made by a non-profit organization may be eligible if it is carried out on commercial parameters.