Instrument Description

Pooling mechanisms are instruments that aggregate risk across a portfolio of projects, countries, cities, etc. to provide diversification for the investor (less concentration of risk in a single asset) and bargaining or buying power for the insured.

Concessionality

While insurance can be a fully commercial instrument, it can often be prohibitively expensive if the risk it is intended to cover is perceived as too high too costly, or too difficult to diversify through a portfolio approach. To this end, premium support for policy holders and/or partial guarantees for insurers can be useful means of increasing the availability of these types of mechanisms.