managing risk.pdf

Managing Risk and Creating Value with Microfinance59the financial sector in general. Such concerns lead to norms on reserve levels and capital adequacy. Finally,regulators should be concerned with consumer protection and transparency, which can be especiallychallenging when dealing with dispersed rural populations (Arce 2007).Important reinsurance issues exist with weather-based insurance. Such products can cover the needs andrisks of several countries in a region. The World Bank, the International Finance Corporation, the EuropeanDevelopment Bank, and Partner Re (a leading international reinsurance company) have contributed€100 million in initial capital to a regional weather-based approach. Services include reinsurance, technicalassistance, and data cleaning. This effort became effective in September 2007 and will serve as a model forfuture programs (Arce 2007).Clients and beneficiaries should be informed of the coverage, means for registering claims and presentingproof, deductibles, and limitations. They also need to know about changes in policy coverage and requirements.The institutions that have direct and regular contact with the policyholders—MFIs, banks, community-basedorganizations, the government, churches, or post offices—are the best prepared to guarantee clients andbeneficiaries access to this information. The government can also play a role through consumer protectionlaws and complaint processes that protect clients when purchasing insurance and ensure that their rights areprotected in practice.How Does Latin America Fare in Microinsurance Coverage?Microinsurance varies widely throughout Latin America and the Caribbean, as a landscape study by theMicroInsurance Centre showed. Map 4.1 shows microinsurance coverage rates in Latin America. The surveyon which this map is based focused on the world’s 100 poorest countries. The Latin American leaders inthis group are Colombia, Peru, and Ecuador, all with relatively good insurance networks. Brazil, Mexico, andother wealthier countries in the region were not included in the survey. Although Brazil and Mexico have lowinsurance coverage rates for the poor, given their relative size and wealth, the case studies in boxes 4.2 and 4.3prove that microinsurance is progressing in those countries as well (Roth, McCord, and Liber 2007).