Swiss Re, Guy Carpenter Team to Offer Microinsurance in Haiti

Haiti hasn't had much good news in recent years. Since 2004, the Caribbean nation has been hit with a series of hurricanes, flooding, and mudslides. Last year, the country was rocked by a devastating earthquake that killed tens of thousands of Haitians. And earlier this month, the country received a massive rainfall that led to additional flooding.

But a group of donors led by Swiss Re and Guy Carpenter & Co. is working to establish an insurance marketplace in Haiti that will help ensure that additional disasters don't undo ongoing economic development efforts taking place in the country.

Swiss Re and Guy Carpenter have joined with Haiti's largest microfinance institution, Fonkoze, to establish a donor-capitalized microinsurance facility dubbed the Microinsurance Catastrophe Risk Organisation or MiCRO.

MiCRO, whose stakeholders also include CaribRM, Mercy Corps and the U.K. Department for International Development, seeks to provide insurance coverage to Haiti's micro-entrepreneurs who have taken steps to increase their economic standing by creating small businesses.

Starting this year, Fonkoze began making coverage available to its 50,000 clients in Haiti, offering insurance through MiCRO to the borrowers who have taken out loans of as little as $200 and $300 to open small businesses like craft shops, food markets and small agricultural ventures. Fonkoze only issues loans to women because they "constitute the backbone of the economy in Haiti," according to the organization's website.

Andrea Keenan, assistant vice president for economic and industry research at A.M. Best, said microinsurance has already proven to provide a number of economic development benefits in countries like India, whose government has begun requiring insurers writing in the country to offer microinsurance along with their more traditional products.

"Microinsurance can go a long way in balancing out the economic stability for the poorest people in a developing country because it ensures that if the primary breadwinner dies or if a small business is wiped out by a natural disaster, the cycle of loss doesn't have to continue," Keenan said. "It allows for a smoothing of that cycle to some extent."

Nikhil da Victoria Lobo, senior vice president of public sector business at Swiss Re, said microinsurance provides a number of benefits to a developing country like Haiti because it ensures that "the clock isn't reset each time a natural disaster comes along."

"We view microinsurance as a fundamental platform for the industry and for economic development. We decided to really focus on this program in Haiti because if we can solve problems in a country that has seen so many natural disasters as the country has, we can do it anywhere," da Victoria Lobo said.

In an interview with BestWire last week, Aidan R. Pope, chief executive officer of Latin America and Caribbean operations at Guy Carpenter, said MiCRO provides insurance on an indexed basis so there's no need to adjust the loss, against rainfall, tropical cyclone and earthquake. "When the loss triggers a certain level, we and the reinsurers pay out to the people affected. It pays off their loans so they don't have that burden on top of all their other issues. They also get a small sum," Pope said (BestWire, June 17, 2011).

Da Victoria Lobo said microinsurance also offers the companies who provide it perks as well. He said Swiss Re sees microinsurance as a "commercially viable" line of business that has the potential to benefit from economies of scale as more micro-entrepreneurs begin receiving coverage.

"The motive is absolutely a business motive," da Victoria Lobo said. "As we begin to scale microinsurance in Haiti, we will begin to see the positive impact of economies of scale. We want a solution in which competitors are drawn to the market because that will provide better market capabilities to the sector and allow companies like Swiss Re to consistently support microinsurance."

Da Victoria Lobo said Swiss Re's next goal for MiCRO is to expand the number of donor partners contributing to the program and to increase the number of borrowers who are receiving microinsurance coverage. "At this stage, we have demonstrated a proof of concept in a short amount of time," da Victoria Lobo said. "Microinsurance is not a panacea, but it is a natural step in developing a long-term solution to people with few other options."

He added that as the program takes root in Haiti, Swiss Re plans to expand its microinsurance offerings into other developing nations around the world in addition to the macroinsurance backing the company offers them.

"When we look at the kinds of events we're seeing all over the world, not just with natural disasters but with people living longer and other issues, the public sector is taking on more and more risk on its balance sheet," he said. "We see insurance, both at the micro and macro level, as a powerful tool in closing that gap."

(By Jeff Jeffrey, Washington Correspondent: [email protected])