Microinsurance Catastrophe Risk Organisation (MiCRO) - Haiti
By the end of 2015, the project managed to insure 60,516 micro entrepreneurs, the vast majority low-income women entrepreneurs in rural areas of Haiti.
Insurers: Alternative Insurance Company (AIC)
Reinsurers: Swiss Re, MiCRO
Delivery Channels: Fonkoze Financial Services (microfinance institution)
Mercy Corps was the founding entity that founded this initiative.
Natural catastrophe and weather index insurance
Floods, hurricanes, earthquakes
US$11.1 million (Fonkoze 2013). The average Fonkoze microloan is US$220.
GIIF worked with MiCRO through capacity building as well as subsidizing microinsurance premiums paid by participating MFI clients in order to support the expansion of an index-based catastrophe micro-insurance product that was the first index insurance project funded by GIIF in the Caribbean. MiCRO is a reinsurance provider based in Barbados. MiCRO currently provides natural catastrophe and weather index insurance to microfinance institutions (MFIs), which in turn insure low-income micro-enterprises.
US$8,897,427 (2012/3)
(Haiti is one of the most disaster-prone countries in the world with earthquakes, hurricanes and flashfloods. MiCRO and Fonkoze have redesigned the index insurance portfolio product to reduce basis risk and excessive payouts.)
6-7% of value of microloan (MiCRO is covering up to 50 percent of premium cost)
- Micro-loans and Payouts: Through Haitian MFI Fonkoze, MiCRO covers micro-loan balances, which means micro-enterprises can receive payouts if index triggers are reached for catastrophic events. The insurance allows clients to repair their homes or businesses and replace inventory destroyed or damaged after natural catastrophes or adverse weather. The $8.9 million payout in 2012/13 helped thousands of women-owned micro-enterprises repair damages, replace inventory and reopen businesses.
- Access to Finance: Index insurance gives Fonkoze the risk management financial protection they need to increase lending to their microenterprise clients although no hard figures are yet available on increased access to finance due to insurance.
The MiCRO pilot is still being tested. The key to success will be improving the rain, wind, and seismic parameters that guide the microinsurance payouts so that both end clients and MFI distributors find the products more affordable and attractive. IFC provided technical expertise to address key flaws in the original product design and guidance on further enhancements to develop a viable product for MFI distributors. IFC also helped the principal MFI client Fonkoze understand the risks affecting its portfolio with a deep dive into weather risks. During the insurance coverage period, two major tropical storms occurred, triggering payouts. GIIF helped MiCRO adjust the product into one desirable to the MFI – a less costly coverage as a portfolio product, with the MFI taking responsibility for transferring benefits to their clients. With GIIF grant funds, MiCRO was able to cover the costs of up to 50% of the premiums for three years
Due to basis risk (claims submitted by clients not matching payouts – and claims surpassing the payouts from MiCRO) - Fonkoze switched from micro-retail coverage for individual clients to portfolio coverage through the MFI. The biggest challenge now is helping Fonkoze assess its risk and determine the level of insurance coverage needed, while ensuring insurance premiums are affordable.
MiCRO works through MFI Fonkoze, and hopes to reach economies of scale through other MFI distributors. Through GIIF technical assistance, the project will expand the reach of the product offer to more low-income microfinance clients by adding at least one additional MFI to MiCRO's distribution channels by the end of the project. With GIIF grant funds, MiCRO is able to cover the costs of up to 50 percent of the premiums for three years, allowing MiCRO time to bring its index product up to a sustainable market level.
Approximately 70,000 micro-enterprises are expected to be insured by the end of December 2016. The total projected value of active insurance contracts is estimated to be $20.5 million by 2016.
Steve Mitchell, Chairman of the Board of MiCRO (smitchell@mercycorps.org)
Anne Hastings, Director MiCRO and Manager, Microfinance CEO Working Group (ahastings@accion.org)
Carlos Boelsteri, CEO of MiCRO (cboelsterli@microrisk.org)
Websites: http://www.microrisk.org and http://www.fonkoze.org