Islamic finance is in the news and is becoming increasingly relevant to the international finance and investment community. Aside from the numerous Islamic finance institutions in the Gulf region and other Muslim countries, some major international banks, such as Citibank and HSBC, offer Islamic finance facilities. Moreover, Standard & Poor’s recently announced the launch of Shariah-compliant versions of its widely used global indices, the S&P 500 Shariah, S&P Europe 350 Shariah and S&P Japan 500 Shariah. Similarly, Shariah-compatible trade credit and investment insurance is available through ICIEC.

ICIEC is a multilateral export credit and investment insurance organization whose shares are divided among 35 member countries and the Islamic Development Bank (IDB), which holds a 50% share and of which ICIEC is a subsidiary.

Established in 1994, ICIEC’s mandate is to promote exports from, and foreign investment into, its Islamic member countries by providing and encouraging the use of Shariah-compatible export credit and investment insurance as credit and country risk mitigation instruments.

Shariah-Compliant ICIEC Insurance

ICIEC is the only multilateral insurance company in the world that provides export credit insurance, political risk insurance and reinsurance services according to the Islamic Shariah Law. ICIEC provides Export Credit Insurance for exports from one of its member countries, and provides Foreign Investment Insurance for foreign investments flowing into a member country.

The compatibility of ICIEC’s insurance with Shariah is reflected in its insured contracts and in the management of its accounts.

Under Islamic Insurance, only contracts that are “Shariah-compliant” can be insured. In other words, contracts dealing with Shariah-prohibited goods and services such as alcohol or pork are not eligible for insurance services. Insurance for equity investments in such projects is eligible for standard PRI coverages. For financial contracts (such as credit facilities), the insurance may be provided to cover the principal investment, but not interest, since charging interest on credit is considered usury. Instead, ICIEC insures transactions under the Murabaha form of Islamic finance which enables customers to make a purchase without having to take out an interest-bearing loan. The bank buys an item and then sells it to the customer at a profit and on a deferred payment basis.

Shariah law also impacts the way ICIEC manages its accounts. Instead of placing all financial returns and assets under a single pool, as is the practice for most export and political risk insurers, ICIEC places earnings from premiums and fees into a Policyholder’s Fund, which is distinct from core institutional assets in the Shareholder’s Fund.

Investment Insurance products provided by ICIEC are not unlike those provided by most similar organizations. ICIEC offers three foreign investment insurance policies:

  1. An Equity Investment Insurance Policy;
  2. A Financing Facility Investment Insurance Policy; and
  3. A Loan Guarantees Investment Insurance Policy.

The policies provide long-term insurance cover against the classic country risks for foreign investment flows into member countries, irrespective of their country of origin. Risks covered include war, civil disturbances, foreign exchange convertibility and transfer restrictions, and government interference.

Strategic Alliances

ICIEC has partnerships with other major international credit and political risk insurers and multilaterals, including MIGA, COFACE and Atradius. ICIEC recently signed a Memorandum of Understanding with EDC of Canada.

ICIEC, as a regional ECA, also plays a special role with the ECAs of the Organisation for the Islamic Conference (OIC) member countries. In January 2007, ICIEC hosted the 5th Regional ECA meeting in Jeddah, Saudi Arabia, which was attended by ECAs from 17 countries and observers from Africa Trade Insurance Agency (ATI), COFACE, MIGA, Afreximbank, ECGC of India and others. ICIEC has a number of MOUs with these national ECAs and is providing reinsurance.

ICIEC also manages and implements the IDB Group’s Investment Promotion Technical Assistance Program in partnership with MIGA and the United Nations Industrial Development Organization (UNIDO). The program promotes improved investment marketing capacity in member countries through technical assistance and the establishment of an Electronic Investment Database on member countries’ investment environments and opportunities. ICIEC plays a key role in promoting investment to the OIC member countries. Through its investment insurance operations, it concurrently promotes investment while ensuring that regional business norms are respected. In order for foreign investors to effectively tap into opportunities in the OIC, expertise in Islamic finance is a necessity. ■


Diana Smallridge, President and CEO of International Financial Consulting Ltd, is a well-known expert on official financial institutions. Her company recently advised The Islamic Corporation for the Insurance of Investment and Export Credit Insurance (ICIEC) on its organizational restructuring to accommodate the rapid growth of its business.