(IFC) IFC and the IFC Financial Institutions Growth Fund (FIG Fund) signed a US$140m equity investment in Consorcio Financiero to support its growth in the banking and insurance sectors in Chile as well as its regional expansion, mainly in the Andean region. IFC will invest US$100m and the FIG Fund US$40m.
This new capital injection will help expand Consorcio Financiero’s banking operations to increase access to finance for medium-sized companies and large projects in Chile. The investment will also boost the insurance sector, which is essential for deepening capital markets and deploying long-term funds into the economy, thus supporting growth and infrastructure development. IFC started its support to the Consorcio Financiero group last year when in May it provided US$60m to Banco Consorcio to enhance the bank’s lending program for renewable energy projects in Chile.
Marcos Büchi, Chairman of the Board of Consorcio Financiero, said. “It is very important for Consorcio to have such a high level partner like IFC, which brings vast knowledge on the regional financial markets and unique international experience. This will help us strengthen our business development positioning and our corporate governance practices.” Büchi also noted that “Consorcio values this new strategic partnership with IFC, in particular now when we commemorate our 100th anniversary and are taking on new challenges by expanding in the insurance and banking markets in Chile and the region.”
Although demand for insurance is growing in Chile, there is still room for increasing the reach of insurance coverage for both individuals and companies. For example, Chile’s life insurance penetration rate is only 1 percent of GDP if annuities are excluded. Increased insurance coverage for companies and investors will also allow them to take more risks and grow, while protecting productive assets and income.
“Through this investment, we are supporting Consorcio Financiero’s expansion plans in Chile and into other countries in Latin America, as well as enhancing access to insurance, particularly to households and to sectors that create jobs and contribute to economic growth,” said Marcelo Castellanos, IFC Manager for the Financial Institutions Group, Latin America and the Caribbean. “With this new investment, IFC continues to bring its recognized industry expertise and experience supporting the development of financial markets in Chile and globally.”
Tim Krause, Co-Head of the IFC Financial Institutions Growth Fund, also noted: “The FIG Fund looks forward to working with Consorcio to support its growth strategy in the insurance and banking sectors in Chile and the Andean region.”
IFC’s strategy in the insurance sector aims to develop and increase access to insurance products and risk management solutions in emerging markets at both the corporate and individual levels. By extending the reach of insurance, IFC aims to help enable businesses and investors to assume more risk and achieve stronger growth; contribute to deepening capital markets, in particular through long term life insurance savings products and pensions; and increase individuals’ social and financial stability by protecting them against unplanned or catastrophic disasters. Local capital markets evolve as insurance companies reach a significant volume of contractual savings. In the past five years, IFC invested US$656m in the insurance sector in Latin America, out of which 30% relate to equity investments in pension providers, 28% in health insurers and 17% in life insurers.