International Consortium Unveils Scalable, Innovative Model for Micro-insurance to Combat the Financial Impact of Natural Disasters
The formation of Microinsurance Catastrophe Risk Organisation (MiCRO), an innovative donor-capitalized insurance facility developed by a syndicate of strategic stakeholders, will empower Haiti's micro-entrepreneurs to protect themselves against the economic aftermath of severe natural catastrophes. The facility’s scalable model for microinsurance is the first of its kind in Haiti and is aimed at the country's ‘informal sector’ – the organized poor who have taken steps to increase their economic standing and stability through the creation of small businesses.
MiCRO's founding partners include Swiss Re, a leading and highly diversified global reinsurer committed to working with governments and related entities to further strategic, long term country risk management; Caribbean Risk Managers Limited (CaribRM), the risk analytics arm of CGM Gallagher Group, the Caribbean’s largest risk intermediary; GC Micro Risk SolutionsSM (GC Micro), a division of the world’s leading risk and reinsurance specialist Guy Carpenter & Company, LLC; Mercy Corps , a global relief and development agency; and Fonkoze, Haiti’s leading microfinance institution.
Policies issued by MiCRO will provide microfinance clients with financial protection against destruction caused by specific natural catastrophes using an innovative settlement process. Through the use of parametric triggers, MiCRO’s policy process increases transparency to buyers and enhances rapid claim settlement after a disaster strikes.
This viable, long term insurance platform will enable Haiti’s informal sector to recover more quickly after natural catastrophes, with potential expansion to protect Haitians from other kinds of risks in the future. The distribution and structuring of MiCRO’s tools offer Haiti’s informal sector the opportunity to create a foundation for long-term economic stability and development.
As world leaders in the development of catastrophic risk solutions, Swiss Re, CaribRM and Guy Carpenter view the development of this product as an opportunity to demonstrate the viability of a scalable model for microinsurance that has potential to be applicable throughout the developing world.
“Microinsurance is vital in countries where there is high exposure to catastrophes and limited economic means to recover quickly after an event has occurred” explains Nikhil Da Victoria Lobo, Vice President, Swiss Re. “Our ultimate goal is to build bottom-up and top-down solutions to help nations foster long-term economic development and stability.”
“The development of innovative parametric insurance tools has provided opportunities to help protect the world’s most vulnerable from the vagaries of the current and future climate, as well as geophysical risks such as earthquakes,” says Simon Young, CEO of CaribRM. “The MiCRO project in Haiti helps the social and economic development of individuals and the nation and launches a program that has global application.”
"When private risk financing mechanisms fail or are insufficient, the public sector and low-income individuals are often left to foot the bill. Recent occurrences in Haiti underscore the importance of developing proactive and innovative public-private risk financing solutions like MiCRO to address catastrophic exposures." said Alex Bernhardt, Head of GC Micro.
MiCRO is seeking to work with microfinance institutions in Haiti to provide their clients with access to this catastrophe insurance product. The country’s largest microfinance institution, Fonkoze, has already started making catastrophe coverage available to its 50,000 clients. Fonkoze is one of the best-known MFIs worldwide for its innovative approaches to reaching the most economically disadvantaged and helping them take the first steps out of poverty.
“There are far too many Haitians who work hard to save and build their assets, only to find them destroyed overnight by a hurricane, flood or earthquake,” says Anne Hastings, CEO of Fonkoze Financial Services. “Microinsurance to manage these inevitable events is a prerequisite for escaping poverty and building a sustainable future.”
“With catastrophe insurance for microfinance entrepreneurs, we are offering Haitians a financial service that they previously didn't previously have access to,” says Phil Oldham, Mercy Corps Regional Program Director. “It's an important step in bringing unbanked Haitians further into the formal sector and builds on Mercy Corps' work to introduce new financial services through mobile banking and small and medium business development, to better protect the economic stability of Haiti's poor.”
MiCRO's incorporation was completed on March 17, 2011, with Mercy Corps and Fonkoze as the founding investors. The UK Department for International Development (DFID) supported the development of MiCRO and is a core donor. Discussions are well advanced with a number of additional donors and investors including the Swiss Agency for Development and Cooperation (SDC), the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB) and the International Finance Corporation of the World Bank.
The public unveiling of the project occurs in Port-au-Prince, Haiti on March 30, 2011. The event is sponsored by the IDB-MIF and Haiti Integrated Finance for Value Chains and Enterprises (HIFIVE), a USAID project.