The Arab Petroleum Investments Corporation (APICORP), has signed a Documentary Credit Insurance Policy (DCIP) with the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), a member of the Islamic Development Bank group.

APICORP is a multilateral development bank owned by the ten member nations of the Organisation of Arab Petroleum Exporting Countries.

Risk management

The DICIP aims to help APICORP effectively manage risks in its letter of credit (L/C) transactions and L/Cs of petroleum products exports in ICIEC member countries.

It is designed to mitigate the risks associated with the non-payment of L/Cs, including insolvency of the buyer or issuing bank; failure or refusal of the issuing bank to provide reimbursement on due date, and currency inconvertibility and transfer restrictions imposed by issuing bank's country.

Cover is also provided for expropriation, confiscation or government intervention in the business of the issuing bank and war or civil disturbance in the issuing bank's country.

Diversification strategy

The DCIP provides insurance coverage to transactions in which a minimum of 30 per cent of the added value in the products transacted come from ICIEC member states.

According to APICORP's chief executive and general manager, Ahmad Bin Hamad Al-Nuaimi, trade finance forms an important focus in the multilateral development bank's diversification strategy and contributes significantly to its mandate to support Arab energy industry development.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.