MR Microinsurance_2012_03_29.indd - International Labour ...
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MR Microinsurance_2012_03_29.indd - International Labour ...

MR Microinsurance_2012_03_29.indd - International Labour ... MR Microinsurance_2012_03_29.indd - International Labour ...

ilo.org
10.12.2012 Views

94 Emerging issues member cooperatives. Th e payout is not related to the individual loss adjustment, but depends on defi ned thresholds for the weather event. Each cooperative receives a pre-defi ned percentage of its loan portfolio as a payout once a certain wind or rainfall trigger has been reached. Th e cooperatives insured will then use these funds to make favourable emergency loans available to aff ected borrowers. Box 4.4 CLIMBS (Coop Life Insurance and Mutual Benefi t Services), Philippines Hard facts Start: 2011 Model developers: Munich Re, CLIMBS Scale: Meso Insurance type: Wind and rain index insurance to cover loans Risk covered: Typhoon Risk carriers: CLIMBS, Munich Re Clients: Member cooperatives of CLIMBS (umbrella organization) Distribution channel: CLIMBS Challenges No evaluation yet. Preliminary lessons learned 1. Even complex weather risks such as typhoons or extreme events such as fl ash fl oods can be insured if appropriate product design is in place. 2. Pre-existing social structures, e.g. cooperatives or associations, increase the likelihood that a scheme will be successful. 3. Dialogue with people at risk is crucial for tailor-made solutions. 4. Regional payouts help product acceptance and reduce the basis risk. 5. Th e use of modern weather observation methods like satellite data broadens the range of tools and facilitates administration. Source: Authors.

Microinsurance and climate change Morsink et al. (2011) identifi ed several of these meso-level index schemes, covering both the idiosyncratic risks of clients and the aggregated risks of aggregators. Th e emergence of these eff orts, in Burkina Faso, Ghana, Haiti, India, Mali and Peru (see Box 4.5), indicate an increasing interest in such an approach to protecting the poor, to expand the scope of who can be covered, beyond farmers, to include microentrepreneurs and other low-income groups. Although most meso-level schemes are relatively new, their potential for viability and scale seems quite promising. Box 4.5 MiCRO (Microinsurance Catastrophic Risk Organization), Haiti Hard facts Start: 2011 Scale: Meso Model developers: Local insurance providers and MFIs, such as Fonkoze Funding: Inter-American Development Bank (IDB), UK Department for Inter- Inter- national Development (DFID), Mercy Corps, Caribbean Risk Managers Ltd, Guy Carpenter & Company, LLC, Swiss Agency for Development and Coopera- Coopera- Coopera- tion (SDC) Risk carrier/Reinsurer: Swiss Re Risk covered: Rainfall, wind speed or seismic activity Number of clients: 55 000 Fonkoze microcredit clients Cover: Reimbursement of Fonkoze loan in the event of natural disaster. A lump sum of US$125 is provided if home or premises are destroyed, or all or most of their business stock is lost as a result of a natural disaster. Distribution channel: Fonkoze loan offi cer Context Following Following the 2008 2008 hurricane season in in Haiti, Fonkoze realized that sustaining MFI operations would become diffi cult if natural disasters were to be recurring. Fonkoze actively started looking for fi nancial protection against natural disasters and started organizing MiCRO to help Caribbean (especially Haitian) MFIs protect their clients against damages from natural disasters. Besides providing cover at the meso level, the innovation combines parametric cover based on rain- fall, wind speed or seismic activity, plus an assessment of actual losses on the ground by the loan offi cers. If there is basis risk – if the payout based on the para- metric trigger is not suffi cient to cover actual losses – then MiCRO will cover the diff erence, up to US$1 million per year. Th e importance of this fi nancial protection protection was illustrated by the earthquake in Haiti on 12 January 2010, which killed more than 200 000 people and left the country in a shambles, with future generations even more vulnerable to risk. For 95

94 Emerging issues<br />

member cooperatives. Th e payout is not related to the individual loss adjustment,<br />

but depends on defi ned thresholds for the weather event. Each cooperative<br />

receives a pre-defi ned percentage of its loan portfolio as a payout once a<br />

certain wind or rainfall trigger has been reached. Th e cooperatives insured will<br />

then use these funds to make favourable emergency loans available to aff ected<br />

borrowers.<br />

Box 4.4 CLIMBS (Coop Life Insurance and Mutual Benefi t Services), Philippines<br />

Hard facts<br />

Start: 2011<br />

Model developers: Munich Re, CLIMBS<br />

Scale: Meso<br />

Insurance type: Wind and rain index insurance to cover loans<br />

Risk covered: Typhoon<br />

Risk carriers: CLIMBS, Munich Re<br />

Clients: Member cooperatives of CLIMBS (umbrella organization)<br />

Distribution channel: CLIMBS<br />

Challenges<br />

No evaluation yet.<br />

Preliminary lessons learned<br />

1. Even complex weather risks such as typhoons or extreme events such as fl ash<br />

fl oods can be insured if appropriate product design is in place.<br />

2. Pre-existing social structures, e.g. cooperatives or associations, increase the<br />

likelihood that a scheme will be successful.<br />

3. Dialogue with people at risk is crucial for tailor-made solutions.<br />

4. Regional payouts help product acceptance and reduce the basis risk.<br />

5. Th e use of modern weather observation methods like satellite data broadens<br />

the range of tools and facilitates administration.<br />

Source: Authors.

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