Index Insurance Forum

GIIF in Asia Pacific: A Conversation with Vijayasekar

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Vijayasekar Kalavakonda, IFC Senior Financial Sector Specialist, talks about GIIF's current and future projects in Asia Pacific

1. What is the current status of GIIF projects in Asia?

GIIF has several active projects in Asia that have gained momentum; two examples are our projects in Indonesia and the Philippines. The project in Indonesia is the Earthquake Index Insurance (EQII), which will protect the lending portfolios of banks from liquidity crises in the aftermath of an earthquake (as opposed to covering individual homeowners or individual property owners), and will help microfinance institutions (MFIs) and rural banks continue lending to communities. Because the project partner for this project, PT. Reasuransi MAIPARK, is a reinsurer, they cannot sell the product directly; it has to be sold by primary insurers. On this front, both International Finance Corporation (IFC) and PT. Reasuransi MAIPARK are reaching out to potential primary insurance companies to be the underwriters/risk carriers. The partners are also working on developing standard operating procedures (SOPs) that will serve as a training manual for two different sets of stakeholders a) insurers and reinsurers, on product design and pricing; and b) insurers and the insured, to aid in in assessing the risks and the benefits of insuring or transferring the risk.

For the current project in the Philippines, we are working with the Center for Agriculture and Rural Development (CARD) and CARD Pioneer Microinsurance Inc., a joint venture insurance company of CARD and Pioneer Insurance. Pioneer is the third-largest general insurance company in the Philippines, and CARD is the largest microfinance institution in the country. We are looking at two different types of products that address the typhoon-related risks faced by both farmers and lenders. One is an indemnity product that will protect individual CARD farmer borrowers; the other is an index-based product that offers portfolio-level protection for CARD microfinance institutions. The indemnity product is also triggered by weather events, for example the confirmation of a typhoon by the Philippine Atmospheric Geophysical and Astronomical Services Administration (PAGASA).

 

2. Are there any expansion plans for projects in the region?

Over the next three to six months, we plan to look at the Pacific islands. While our colleagues at the Pacific Catastrophe Risk Insurance Pilot Program Project in the Disaster Risk Financing and Insurance Program (DRFIP) are looking at insuring the sovereigns, we will be looking at developing engagements at the meso-level and the micro-level for private sector clients. To kick-start this effort, we hope to do feasibility studies in three or four relatively larger islands such as Papua New Guinea, Fiji, and most likely also Vanuatu, because they have large agricultural sectors that are extremely exposed to natural disaster risks.

India is another country that could potentially benefit from the GIIF’s support of its existing crop insurance program, which is currently being implemented by India’s government. In addition, we are on the lookout for opportunities in Myanmar, Thailand, and Vietnam. For instance, the government of Thailand has recently introduced agricultural insurance products, so we’re looking to engaging with authorities about these products. 

 

3. What new innovations are being applied to the development of index insurance products in Asia?

On the R&D side, we are working on a couple of innovations such as developing rain sensors that can be embedded into rooftop solar panels so that we are able to have a much larger network of gauges to collect rainfall data.  To achieve this, we are working with international partners in Europe to use the sensors that are found in windshield wipers and install them in rooftop solar panels to measure rainfall. If this innovation is successful we will have a great deal more useful data about rainfall. 

The second innovation is the use of mobile phones to take pictures of crops at various growth stages and then use those images with a machine code to estimate and measure crop yields and/or crop losses.  This has the potential to revolutionize the way we do crop-loss assessments, and could potentially enable us to offer individual farmer-level insurance coverage or indemnity-based insurance coverage more effectively. 

 

4. What are the key opportunities and challenges for index insurance in general, and particularly in the region?

One big challenge that we need to overcome as we move forward in Asia is converting projects with high potential into real market opportunities.. In short, the challenge for us is to be able to move from these small pilot projects to scale, to larger volumes. One important element in scaling up is developing data that are more reflective of geographical and climatic realities. When we have accurate datasets, it is easier for us to design and develop products with triggers that are more attractive in the marketplace.

To address this challenge, we work with various local partners to ensure that the scaling up of pilot projects will have a good chance of becoming successful. Our partners include agri-business companies, seed producers, and financial institutions, including commercial banks and MFIs.

In the interim, we’re also trying to invest in capacity building. For example, our partner in Bangladesh, Green Delta Insurance, has been open to making training and capacity-building courses available to other insurers within the market. 

One concrete example of how we are overcoming challenges in the marketplace is our involvement in the development of risk-assessment tools. We have finalized what we call the “Agri Credit Risk Tool,” which assesses risks from an agro-meteorological perspective, and which will be given as a value-added service to commercial banks by the Green Delta Insurance Company. This web-based tool will help loan officers assess risks based on the types of crops the farmer grows, not the credit risk of the farmer.