Foreign Investment Insurance
Published on AidPage by IDILOGIC
on Jun 24, 2005
Purpose of this program:
To insure investments of eligible U.S. investors in developing countries and emerging markets, against the political risks of inconvertibility, expropriation, and political violence. Special programs include insuring (l)contractors and exporters against arbitrary drawings of letters of credit posted as bid, performance or advance payment guaranties, (2)petroleum exploration, development and production (3)leasing operations, and (4) debt financials, including securities.
Possible uses and use restrictions...
To encourage private U.S. investment in developing countries and emerging economies by protecting against certain political risks. Investments may be eligible for insurance if they benefit the social and economic development of the host country. OPIC will not support projects that could result in the loss of U.S. jobs, adversely affect the U.S. economy, have a negative impact on the host country's development or environment, or contribute to violations of internationally recognized worker rights.
Who is eligible to apply...
Citizen of the United States; a corporation, partnership, or other association created under the laws of the United States or any State or territory, of which more than 50 percent is beneficially owned by U.S. citizens; a foreign corporation at least 95 percent owned by such entities; or any other 100 percent U.S.-owned foreign entity.
A bilateral agreement between the United States and the host country government must be in place before OPIC can provide insurance for a given country. Additionally, special project approval by the foreign government is required in some countries before insurance can be provided.
Note:This is a brief description of the credentials or documentation required prior to, or along with, an application for assistance.
About this section:
This section indicates who can apply to the Federal government for assistance and the criteria the potential applicant must satisfy.
For example, individuals may be eligible for research grants, and the criteria to be satisfied may be that they have a professional or scientific degree,
3 years of research experience, and be a citizen of the United States. Universities, medical schools, hospitals, or State and local governments may also be eligible.
Where State governments are eligible, the type of State agency will be indicated (State welfare agency or State agency on aging) and the criteria that they
Certain federal programs (e.g., the Pell Grant program which provides grants to students) involve intermediate levels of application processing, i.e., applications
are transmitted through colleges or universities that are neither the direct applicant nor the ultimate beneficiary. For these programs,
the criteria that the intermediaries must satisfy are also indicated, along with intermediaries who are not eligible.
How to apply...
The insurance program has a two-step application process. Investors must first register their projects with OPIC before making an irrevocable commitment to invest. Once the details of the investment have been established, an application for insurance coverage is filed. OPIC charges a retainer fee after the submission of an application for insurance in order to proceed with review of the project. Registration and application forms are available on request from the Insurance Applications Officer, Overseas Private Investment Corporation, 1100 New York Avenue, NW., Washington, DC 20527, or on OPIC's website: www.opic.gov.
Note: Each program will indicate whether applications are to be submitted to the Federal headquarters, regional or local office, or to a State or local government office.
Insurance is issued directly to the applicant by OPIC, or through a broker if the investor so chooses.
Note: Grant payments may be made by a letter of credit, advance by Treasury check, or reimbursement by Treasury check.
Awards may be made by the headquarters office directly to the applicant, an agency field office, a regional office,
or by an authorized county office. The assistance may pass through the initial applicant for further distribution by
intermediate level applicants to groups or individuals in the private sector.
Deadlines and process...
Registration must be made prior to making an irrevocable commitment to invest. The registration remains active at OPIC for 2 years.
When available, this section indicates the deadlines for applications to the funding agency which will
be stated in terms of the date(s) or between what dates the application should be received.
When not available, applicants should contact the funding agency for deadline information.
Range of Approval/Disapproval Time
Will vary depending on size and complexity of project.
Registration letter. This program is excluded from coverage under E.O. 12372.
This section indicates whether any prior coordination or approval is required with governmental or nongovernmental units
prior to the submission of a formal application to the federal funding agency.
In some cases, there are no provisions for appeal. Where applicable, this section discusses appeal procedures or allowable rework time for resubmission
of applications to be processed by the funding agency. Appeal procedures vary with individual programs and are either listed in this section or
applicants are referred to appeal procedures documented in the relevant Code of Federal Regulations (CFR).
OPIC insurance contracts can be offered at fixed rates for up to 20 years. Investor has the opportunity to change insurance elections annually or semi-annually. Policies are non-cancelable by OPIC, provided that investor is paying premiums and is not in material breach of the contract.
In some instances, renewal procedures may be the same as for the application procedure, e.g., for projects of a non-continuing nature renewals will be treated as new, competing applications; for projects of an ongoing nature, renewals may be given annually.
Who can benefit...
OPIC does not support projects that will result in the loss of U.S. jobs, that have a negative impact on the host country's economy or environment, or contribute to violations of internationally recognized worker rights. OPIC only supports projects that contribute to the economic and social development of the host country.
About this section:
This section lists the ultimate beneficiaries of a program, the criteria they must satisfy and who specifically is not eligible. The applicant and beneficiary will generally be the same for programs that provide assistance directly from a Federal agency. However, financial assistance that passes through State or local governments will have different applicants and beneficiaries since the assistance is transmitted to private sector beneficiaries who are not obligated to request or apply for the assistance.
What types of assistance...
Financial assistance provided to assure reimbursement for losses sustained under specified conditions. Coverage may be provided directly by the Federal government or through private carriers and may or may not involve the payment of premiums.
How much financial aid...
Range and Average of Financial Assistance
Up to $250,000,000.
This section lists the representative range (smallest to largest) of the amount of financial assistance available. These figures are based upon funds awarded in the past fiscal year and the current fiscal year to date. Also indicated is an approximate average amount of awards which were made in the past and current fiscal years.
(Insurance Issued) (Aggregate Maximum Insured Amount) FY 03 $1,733,000,000; FY 04 est $1,800,000,000; and FY 05 est $2,000,000,000.
The dollar amounts listed in this section represent obligations for the past fiscal year (PY), estimates for the current fiscal year (CY), and estimates for the budget fiscal year (BY) as reported by the Federal agencies. Obligations for non-financial assistance programs indicate the administrative expenses involved in the operation of a program.
Note: This 11-digit budget account identification code represents the account which funds a particular program.
This code should be consistent with the code given for the program area as specified in Appendix III of the Budget of the United States Government.
Examples of funded projects...
Examples of insured projects include: private power generation, mining, petroleum, telecommunications, commercial bank, oil and gas processing equipment, construction, food processing, equipment leasing, etc.
About this section
This section indicates the different types of projects which have been funded in the past. Only projects funded under Project Grants or Direct Payments for Specified Use should be listed here. The examples give potential applicants an idea of the types of projects that may be accepted for funding. The agency should list at least five examples of the most recently funded projects.
Since 1971, OPIC, a self-sustaining agency, has supported more than $150 billion in U.S. investment overseas that will generate $66 billion in U.S. exports and support more than 257,000 American jobs. In 2003, OPIC had a net income of $296 million. Additionally, OPIC has benefited the more than 150 countries in which it has operated or is currently operating, supporting sustainable development and international trade while solidifying free markets.
Criteria for selecting proposals...
See USES AND USE RESTRICTIONS and ELIGIBILITY REQUIREMENTS.
Length and Time Phasing of Assistance
Maximum insurance term is 20 years for equity investment; for loans, the term of the loan; for contracts, the term of the contract.
Formula and Matching Requirements
Not applicable. In most cases, insured must retain at least 10 percent of the risk as self- insurance.
A formula may be based on population, per capita income, and other statistical factors. Applicants are informed whether there are any matching requirements to be met when participating in the cost of a project. In general, the matching share represents that portion of the project costs not borne by the Federal government. Attachment F of OMB Circular No. A-102 (Office of Management and Budget) sets forth the criteria and procedures for the evaluation of matching share requirements which may be cash or in-kind contributions made by State and local governments or other agencies, institutions, private organizations, or individuals to satisfy matching requirements of Federal grants or loans.
Cash contributions represent the grantees' cash outlay, including the outlay of money contributed to the grantee by other public agencies, institutions, private organizations, or individuals. When authorized by Federal regulation, Federal funds received from other grants may be considered as the grantees' cash contribution.
In-kind contributions represent the value of noncash contributions provided by the grantee, other public agencies and institutions, private organizations or individuals. In-kind contributions may consist of charges for real property and equipment, and value of goods and services directly benefiting and specifically identifiable to the grant program. When authorized by Federal legislation, property purchased with Federal funds may be considered as grantees' in-kind contribution.
Maintenance of effort (MOE) is a requirement contained in certain legislation, regulations, or administrative policies stating that a grantee must maintain a specified level of financial effort in a specific area in order to receive Federal grant funds, and that the Federal grant funds may be used only to supplement, not supplant, the level of grantee funds.
Post assistance requirements...
Annual or semi-annual election of current coverage, annual or semi-annual payment of premiums, and such information as may be requested by OPIC to monitor the project or to make a determination in the case of a claim for compensation.
This section indicates whether program reports, expenditure reports, cash reports or performance monitoring are required by the Federal funding agency, and specifies at what time intervals (monthly, annually, etc.) this must be accomplished.
This section discusses audits required by the Federal agency.
The procedures and requirements for State and local governments and nonprofit entities are set forth in OMB Circular No. A-133.
These requirements pertain to awards made within the respective State's fiscal year - not the Federal fiscal year,
as some State and local governments may use the calendar year or other variation of time span designated as the fiscal year period,
rather than that commonly known as the Federal fiscal year (from October 1st through September 30th).
When claim for compensation is pending and after such payment is made, the investor has a duty to cooperate with OPIC in supplying all information requested pertaining to the claim. These responsibilities are clearly spelled out in each insurance contract.
This section indicates the record retention requirements and the type of records the Federal agency may require.
Not included are the normally imposed requirements of the General Accounting Office.
For programs falling under the purview of OMB Circular No. A-102, record retention is set forth in Attachment C.
For other programs, record retention is governed by the funding agency's requirements.
Foreign Assistance Act of 1969, Title IV, Section 234(a), Public Law 91-175, 22 U.S.C. 2191, et seq.
This section lists the legal authority upon which a program is based (acts, amendments to acts, Public Law numbers, titles, sections, Statute Codes, citations to the U.S. Code, Executive Orders, Presidential Reorganization Plans, and Memoranda from an agency head).
Regulations, Guidelines, And Literature
"OPIC Program Handbook," free.