BAKU, Azerbaijan, July 10. The facultative reinsurance agreement signed between Kazakhstan's KazakhExport national company and the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank (IsDB), for the export of locomotives from Kazakhstan to Azerbaijan will not only facilitate international trade but will also support domestic companies in their exports, Oussama Kaissi, CEO of ICIEC, told Trend.
In May of this year, ICIEC provided a reinsurance cover to KazakhExport for a transaction involving the export of locomotives from Kazakhstan to Azerbaijan, both of which are Member States of ICIEC. The reinsurance facility creates capacity for KazakhExport to cover more transactions in host countries, and it enables the two organizations to further explore other business opportunities.
"By reinsuring the transaction, the insurer (KazakhExport) is ceding (transferring) a certain percentage (70 percent) of the risk to the reinsurer (ICIEC). By doing this, the insurer reinstates its original capacity for the same obligor (Azerbaijan Railways) and can book new transactions with Azerbaijan Railways," clarified the CEO.
Touching on the benefits that this agreement can bring to both sides, Oussama Kaissi noted that, Kazakhstan, for instance, can diversify its economy via this agreement.
"Kazakhstan is an oil/gas and mineral-rich country and it is a priority for the government of Kazakhstan to diversify the economy. The TE33A ‘Evolution’ type mainline diesel locomotives covered under this transaction are capital goods and produced by Lokomotiv Kurastyru Zauyty JSC (LKZ JSC) in Astana. The factory creates employment in a non-mineral industry in Kazakhstan and the export transaction brings in foreign currency to Kazakhstan," he said.
Furthermore, he noted transportation to be a strategic sector from the perspective of Azerbaijan.
"Due to its geographical location, the country has been on the historical and modern trade routes between the East and the West. Azerbaijan Railways is fully owned by the government of Azerbaijan and it undertakes projects aligned with the Development Agenda of Azerbaijan. In addition to facilitating international trade, the transaction will also support domestic companies in their exports," the CEO added.
When it comes to the benefits for ICIEC, as the reinsurer, those are twofold. As per its mandate, ICIEC facilitates intra-OIC (Organization of Islamic Cooperation) trade and cooperates with the Export Credit Agency (ECA) of Kazakhstan and supports Kazakhstan’s exports.
"This transaction serves two Sustainable Development Goals (SDG) of the UN. Firstly, it serves SDG 8 [decent work and economic growth] as it promotes inclusive and sustainable economic growth, employment, and decent work. Secondly, it serves SDG 9 [industry, innovation and infrastructure], which is about building resilient infrastructure, promoting sustainable industrialization, and fostering innovation," Kaissi said.
According to the CEO, the insurance contract is for a total amount of $35.4 million and ICIEC’s reinsurance is for 70 percent of this ($24.8 million). The period of coverage is from September 28, 2015, to September 27, 2025.
