When most people think of finance, they almost certainly think of banks, investors, loans, and equity. Almost nobody thinks of insurance as finance, certainly not for corporate finance or project finance.
Generally speaking, the cost of insurance capital will be cheaper than debt or equity capital, because of the way that it is priced. That is when it is used as a risk transfer mechanism. What people do not realise, however, is that insurance can be used either as an alternative source of capital for corporate or project finance, or as a source of deferred capital to repay or refinance debt capital.
Mannheim Foundation has developed 2 distinct funding models which utilise insurance architecture, which conventional banks or investors will struggle to compete with because of their regulatory constraints.
These models were originally developed and tested for long-tail liability funding in the mining sector in South Africa, such as decommissioning and rehabilitation liabilities, but have been developed and refined since 2009 to enable their application in other corporate finance or project finance situations.
Most recently, we have been using these structures in the context of social and affordable housing. For 2024, we would like to utilise these structures to fund climate change initiatives but also funding for hospitals and schools as well as affordable housing and clean energy projects in poorer countries.
Our structures are ideally suited to project finance in poorer countries with weaker currencies or for projects with run-away costs.
For example, we can re-finance or take over financing for public benefit projects which are on hold or in danger of being cancelled due to spiralling costs. Alternatively, we can structure loans which feature a butterfly structure which, on one side, forgives the debt owed, and on the other side, can simultaneously repay the outstanding loan structure. This model uses investment grade structures for the principal repayment, which are often better rated than the underlying borrowers, and have lmited or no exposure to political or currency risk. And, for any given rate of interest, the cost of our funding will be cheaper than almost any other conventional finance. As a consequence, our funding models can deliver more impact than conventional finance or public benefit and to support communities around the world.
We invite lenders and investors to partner with us. Please email us at: enquiries@mannheimfoundation.org, mentioning “Finance Partnering” in the title.