AXA XL provides insurance for Bahamas climate debt swap
AXA XL has provided $30 million in credit insurance to support a debt swap by the government of The Bahamas which will refinance $300 million of its external debt and will free up an estimated $124 million of funding for marine conservation over the next 15 years.
The swap, announced by The Bahamas, The Nature Conservancy (TNC), the Inter-American Development Bank (IDB), and several financial partners, will see Nature Bonds funded by Standard Chartered replace existing commercial debt.
The deal also sees $8 million out into a conservation fund endowment, which is expected grow to $20 million by 2039.
A statement from The Nature Conservancy said: “The Bahamas debt conversion project is a project of firsts.
“It is the first time that a private investor, Builders Vision (an impact platform founded by Lukas Walton), is providing a co-guarantee alongside a multilateral development bank (MDB).
“Also, it’s the first time a private insurer, AXA XL, is providing credit insurance alongside an MDB in support of a sustainable issuance for nature and climate.
“In addition, the project marks the first time that climate-smart MPA commitments are included explicitly in the conservation outcomes to support climate mitigation and adaptation goals.”
It added that the package included a $200 million partial credit guarantee from the IDB, alongside the $70 million collateralised guarantee from Builders Vision and the $30 million in credit insurance from AXA XL. Rothschild & Co served as sole financial advisor to the Ministry of Finance.
"Since 1958, The Bahamas has led in ocean conservation with the establishment of the Exuma Land and Sea Park. Now, our nation takes another ambitious step with an economic programme that promotes ocean conservation and benefits local communities,” said Rochelle Newbold, Director, Climate Change and Environmental Advisory Unit of The Government of The Bahamas. “By strengthening the protection and management programmes of the Marine Protected Area system we will safeguard livelihoods, boost the economy, and contribute to global ocean protection goals.
This will be the fifth Nature Bonds project for TNC, alongside those in Seychelles (2016), Belize (2021), Barbados (2022), and Gabon (2023). Combined, the five projects will support governments to reach new protections or improved management of nearly 238 million hectares of ocean and a total of $1.5 billion of debt refinanced. Importantly, these projects are expected to generate more than $535 million of new funding for conservation, and they demonstrate how quickly this approach is scaling around the world.
“When it comes to addressing the dual crises of the climate emergency and biodiversity loss, there is a funding gap that stifles many countries’ ambitions to invest in nature for the benefit of their people,” said Jennifer Morris, CEO, The Nature Conservancy. “The Bahamas has a strong record in conservation and one of the largest systems of designated marine protected areas in the Caribbean. I am especially excited about this Nature Bonds project, as it will help The Bahamas reach its conservation goals and support sustainable livelihoods. This is further proof that debt conversions, with the right conservation commitments and technical assistance, are an effective market-based solution.”
he successful track record of this innovative form of conservation-focused development finance continues to generate strong interest in the conservation and development finance communities – there is strong interest in expanding its application, said an article on AXA XL’s website.
“Similar debt conversion projects can be tailored to apply in virtually any geography, not just those involving marine habitats. By including political risk and credit insurance to mobilize private sector investors, these financing projects enable sustainable development and conservation in countries whose economic and political environments may limit access to the level of financial support needed.”
The article, by underwriting manager Stuart Barrowcliff and senior underwriter Iva Taylor, said: “Private political risk and credit insurance that combines underwriting expertise, outstanding financial strength and the ability to provide long tenors delivers great value to multilateral institutions, commercial finance organizations and corporate entities.”
“Private political risk insurance makes it possible for development finance organisations and multilaterals to effectively leverage their existing capacity and expand the support they can offer for projects in developing market. AXA XL is proud to support innovation in development finance and TNC’s Nature Bond projects, which reflect our company’s commitment to support sustainability and community resilience.”
Barrowcliff is based in New York and Taylor is based in Bermuda. Both are in AXA XL’s political risk, credit & bond team.
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