ATI, Marsh offer $95 million bank surety for Tanzania rail project
Marsh, a global player in insurance broking and risk management solutions, has provided a $95 million innovative bank surety solution to Yapı Merkezi Construction and Industry Inc., to support the construction of a new high-speed electric railway line in Tanzania.
The solution was structured in collaboration with the African Trade Insurance Agency (ATI), a multilateral pan-African investment insurer, and is backed by ATI’s treaty reinsurers (led by Munich Re) and a consortium of facultative reinsurers Trust Re (lead facultative reinsurer), BarentsRe, AfricaRe, and ZepRe.
Yapı Merkezi was awarded the contract to design and build the new $1.25 billion, 300km (including 95km sidings/passing loops), high-speed electric railway line by Tanzanian state-run railway firm RAHCO: Reli Assets Holding Company (currently TRC: Tanzania Railways Corporation).
The line from Dar es Salaam to Morogoro will replace the century-old track and will have the capacity to transport 17 million tonnes of cargo each year.
To help enable Yapı Merkezi to comply with project requirements to use local Tanzanian banks, Marsh’s Global Bank Surety Syndication team, headed by Manuel López, structured an innovative solution that guarantees Yapı Merkezi’s contractual performance-related obligations and the repayment of advance payments.
“Collaborating with Marsh enables us to keep focused on one of our main priorities: to pave the way for increased investments into ATI’s African member countries. Frequently these inroads can only be made with innovative solutions, which this project embodies.ATI has mobilized investments well in excess of US$1 billion into Tanzania in recent years. Marsh was instrumental in helping us close this deal, thus supporting additional investments into the country and ultimately delivering critical new infrastructure to the people of Tanzania,” said Tusekile Kibonde, the resident Underwriter.
This insurance structure has allowed Yapı Merkezi, as the ultimate corporate beneficiary, to free up domestic Turkish banking lines and more optimally deploy its credit lines, which in turn allows the firm to take on more project risks.
Additionally, this insurance structure allows local banks in African countries to take on more risk than their risk tolerance might otherwise permit. In this instance, ATI supported CRDB Bank Plc and NMB Bank Plc, two top-tier Tanzanian banks, to issue guarantees for this infrastructure project.
“We are proud to have led the reinsurance panel for such a strategic project, working with Marsh and the African Trade Insurance Agency, both of whom share our mission to be innovative in providing solutions for clients”, said Domenico Esposito, Head of Surety Underwriting, Trust Re. “In countries where public and private sector investment in construction and engineering projects are thriving, we see substantial opportunities for contractors to benefit from surety solutions, as Yapı Merkezi has in this case.”
“Surety is quite new to the Turkish market and is still a developing instrument. We are delighted to support Yapı Merkezi in building a sound guarantee structure through the help of surety insurance. We hope this collaboration will help many other Turkish contractors in their future investments around the globe. Marsh Turkey is proud to be the pioneer of using a surety and bank syndication approach on behalf of a major Turkish contractor”, says Hakan Kayganacı, CEO of Marsh Turkey.
Formed in 2013, Marsh’s Global Bank Surety Syndication experts provide industry-leading bond consulting services that combine guarantee and surety capacity to corporate clients, insurers, reinsurers, and banks globally.