Insurance

Insurance is a risk management strategy. Loans may help a household to increase its income but they do not reduce the household's vulnerability or exposure to risks. Easily available savings may help to address this need as households can build reserves from which they can draw in emergency or to smooth cash flow imbalances.

However, this still does not help if they are exposed to risks which cause losses that are beyond their means. Insurance products enable the risks faced by households to be pooled and thus provide protection against larger losses.

Library Resources

resource title type year resource
Pro-poor climate risk insurance: The role of community-based organisations Brief 2018

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In the face of increasingly frequent extreme weather events, the need to manage climate risk becomes more urgent, especially for the most vulnerable countries and communities. With the aim of reducing vulnerability, climate risk transfer in the form of climate risk insurance (CRI) has been gaining attention in climate policy discussions. When properly designed, CRI acts as a safety net against climate change impacts by providing financial support after an extreme weather event. Two main types of insurance enable payouts: indemnity (traditional) insurance or predefined parameters (index-based) insurance. Individuals, groups, or even governments may take out policies with either type of insurance and receive payouts directly (insurer to beneficiary payout) or indirectly (insurer to aggregator to beneficiary payout). Direct insurance is usually implemented at the micro-level with individual policyholders. Indirect insurance is usually implemented through group contracts at the meso-level through risk aggregators and at the macro-level through the state.
While promising, risk transfer in the form of CRI also has its share of challenges. Within the United Nations Framework Convention on Climate Change, the lack of accessibility and afford¬ability of CRI for poor and vulnerable groups have been identified as barriers to uptake. In light of climate justice, asking the poor and climate-vulnerable groups - most of whom do not contribute substantially to anthropogenic climate change - to solely carry the financial burden of risk transfer is anything but just. Employing a human rights-based approach to CRI may ensure that the resilience of poor and climate-vulnerable groups is enhanced in a climate-just manner.
Indigenous peoples are some of the poorest and most climate vulnerable groups. Often marginalised, they rarely have access to social protection. The strong communal relationship of indigenous peoples facilitates their participation in community-based organisations (CBOs). CBOs are a suitable vehicle for meso-insurance, in which risk is aggregated and an insurance policy belongs to a group. In this way, CBOs can facilitate service provision that would otherwise be beyond the reach of individuals.
Conclusions of this briefing paper draw on a conceptual analysis of meso-insurance and the results of field research conducted in March 2018 with indigenous Palaw’ans in the Philippines. We find that CRI needs to be attuned to the differential vulnerabilities and capacities of its beneficiaries. This is particularly true for poor and vulnerable people, for whom issues of accessibility and affordability need to be managed, and human rights and pro-poor approaches need to be ensured. In this context, meso-insurance is a promising approach when it provides accessibility and affordability and promotes a pro-poor and human rights-based approach of risk transfer by:

  • Properly identifying and involving target beneficiaries and duty-bearers by employing pro-poor and human rights principles.
  • Employing measures to improve the financial literacy of target beneficiaries.
  • Designing insurance models from the bottom up.
Author Matias, Denise Margaret; Raúl Fernández; Marie-Lena Hutfils; Maik Winges
Publisher Deutsches Institut für Entwicklungspolitik (DIE)
Primary Language English (en)
Region / Country Global
Keywords Climate Insurance, Community Based Organisation
Related Resources
Sovereign climate and disaster risk pooling 2018

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The G7 InsuResilience Initiative, sponsored by the German presidency of the G7 with the goal of expanding climate risk insurance coverage to an additional 400 million poor and vulnerable people in developing countries by 2020, has already taken significant steps toward expanding existing disaster and climate risk insurance programs and creating new ones. To date, 26 countries in Africa, the Pacific, and the Caribbean and Central America have purchased sovereign catastrophe risk coverage. However, climate and disaster risk insurance coverage for vulnerable people in developing countries is far from comprehensive, and indeed remains low. A key question for G20 consideration is how to strengthen cooperation between G20 countries and developing countries to build solutions that integrate disaster and climate risk into broader financial protection strategies for vulnerable people, and how to set expectations about the role of catastrophe risk pools as a meaningful, cost-effective instrument to that end.

Risk pools can play an important role in moving the management of disaster and climate shocks away from uncertain, ad hoc humanitarian assistance and making it part of planned development. The challenge for the international community is to provide the right set of incentives. Both international partners and potential recipient governments have a responsibility to plan and program financing in advance.

This report focuses on sovereign climate and disaster risk pools as a mechanism to enhance financial instruments available to national and subnational governments.

EIT Climate-KIC and the future of the forestry sector Paper 2018

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In 2016, EIT Climate-KIC began to explore these questions, and the role that forest management practices could play in enhancing climate innovation. Between July 2016 and March 2017, it organised three stakeholder workshops, in France, Switzerland and Finland, to better understand the current state of the European forestry sector. In November 2016, it launched a call for a series of white papers to increase understanding of the most pressing environmental and economic challenges facing the sector, its partners’ current perspectives on these, and their visions for the future of the sector.

The inputs developed and submitted by these partners together with the work developed by the community in the context of current Climate-KIC innovation projects were used to inform this document. This process also identified some major opportunities for EIT Climate-KIC’s innovation community, and underpins the strategy behind its flagship forestry programme, which will be launched later in 2018.

This document synthesises our sectoral analysis and summarises key visions and challenges identified from our partners’ own white papers and project activities. From a methodological point of view, EIT Climate-KIC wishes to clarify that challenges and case studies related to deforestation in tropical countries have not been included; these themes fall under the remit of a specific sub-group of partners.

Climate insurance and water-related disaster risk management Paper 2018

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The number of natural disasters of all types appears to have increased in the last few decades though there is some debate over the evidence for this. What is clear though is that the economic costs associated with extreme weather events have increased. For lesser- developed countries the developmental outcomes have been particularly severe. Recent research indicates that between 1990 and 2015, most economic losses resulted from flooding: around 40% of the total (Daniell, Wenzel, and Schaefer, 2016). Better flood management by governments, for example by China and Japan, seems to have resulted in reduced flood-related losses. Better disaster response and better building and infrastructure have reduced the relative costs in many developed countries. However, for developing countries the necessary regulations and investments are not in place, resulting in them being disproportionately affected when disasters do strike (UNISDR, 2010; Surminski and Oramas-Dorta, 2014).

Many products and initiatives have been developed, but it is not always clear what their effects have been and to what extent they prompt actions to reduce climate risks and build resilience (Gerber and Mirzabaev, 2017). It is necessary to explore the question of how climate- related risk-transfer mechanisms, including insurance, can mobilise water-related disaster risk reduction investments and, by so doing, contribute to development. As the focus is on risk transfer, this paper will cover its role in promoting actions and measures that contribute to the reduction of loss and damage caused by water- related events and, by extension, disaster risk-reduction measures that provide protection from extreme weather events. This paper does not set out to provide solutions or answers to that question. Rather, it seeks to promote a discussion between the insurance and water sectors around this question.

Unlocking smallholder credit: Does Credit-Linked Agricultural Insurance Work? Paper 2018

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This paper reviews possibilities for, and experience with, credit-linked crop insurance, including different types of insurance and credit arrangements, ranging from insurance sold to individual farmers to meso insurance sold to financial service providers to cover losses suffered by farmer borrowers.​

Remote sensing for index insurance. Findings and lessons learned for smallholder agriculture Report 2018 English (en) English (en)

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Index insurance has a role to play in agricultural development and risk management, yet it faces operational and technical challenges to reach scale and sustainability. Data are a key challenge and were the focus of the project “Improving Agricultural Risk Management in Sub-Saharan Africa: Remote Sensing for Index Insurance”. Limited availability, accessibility, quantity and poor quality of data on the ground are some of the primary technical constraints preventing scale-up and sustainability of index insurance. Without sufficient quality data, either it is impossible to design products for some areas and countries, or products that are designed can become unreliable, not compensating when they should. These inconsistencies intensify vulnerability, lead to distrust of insurance, and ultimately have an impact on demand.

This publication details the project, which investigated overcoming issues with ground data by using remote sensing data for index insurance. It describes the different remote sensing options and opportunities available for index insurance, but it also recommends further investment in research and development, supplementary ground data and capacity-building going forward.

The project was financed by Agence Française de Développement with an additional contribution from the Belgian Federal Science Policy Office, and was carried out by the Weather Risk Management Facility of the International Fund for Agricultural Development and the World Food Programme. The Flemish Institute for Technological Research (VITO) provided significant contributions and support throughout the project.

For a summary of key information for people working in the insurance community, agricultural development and government  please refer to Remote sensing for index insurance: An overview of findings and lessons learned for smallholder agriculture.

Publisher website  -  English (en)

Document url  -  English (en)

Télédétection pour l’assurance indicielle: Une vue d’ensemble des découvertes et enseignements pour l’agriculture des petits exploitants Report 2018 English (en)

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L’assurance indicielle est un type d’assurance agricole qui peut favoriser le développement agricole et faciliter la gestion des risques en protégeant les actifs et en encourageant les investissements productifs. Toutefois, des difficultés opérationnelles et techniques font obstacle à l’expansion et à la durabilité de l’assurance indicielle. Le projet “Amélioration de la gestion des risques agricoles en Afrique subsaharienne: la télédétection pour l’assurance indicielle” a porté principalement sur les données, qui constituent un défi majeur – s’agissant notamment de leur disponibilité, accessibilité, quantité et qualité.

La présente publication, qui décrit le projet dans ses grandes lignes, vise à donner aux personnes travaillant dans les domaines de l’assurance et du développement agricole, et auprès des gouvernements, un aperçu des possibilités offertes et des difficultés présentées par la télédétection pour l’assurance indicielle, et à formuler des recommandations concernant les secteurs nécessitant des efforts et des investissements supplémentaires.

Le projet  a pu être mené grâce au financement de l’Agence française de développement et à la contribution supplémentaire de la Politique scientifique fédérale belge. Ce projet a été mis en oeuvre par le Mécanisme de gestion des risques climatiques (WRMF, Weather Risk Management Facility) du Fonds international de développement agricole (FIDA) et par le Programme alimentaire mondial (PAM). L’Institut flamand pour la recherche technologique (VITO) a apporté des contributions et un soutien importants tout au long du projet.

site de l'événement  -  English (en)

Author Coleman, E., Dick, W., Gilliams, S., Piccard, I., Rispoli, F., & Stoppa, A.
Publisher Fonds international de développement agricole - FIDA
Number of Pages 60
Primary Language French (fr)
Region / Country Global
Keywords Assurance indexée, Assurance agricole, Assurance climatique
Related Resources
EIT Climate-KIC and the future of the forestry sector Paper 2018

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In 2016, EIT Climate-KIC began to explore these questions, and the role that forest management practices could play in enhancing climate innovation. Between July 2016 and March 2017, it organised three stakeholder workshops, in France, Switzerland and Finland, to better understand the current state of the European forestry sector. In November 2016, it launched a call for a series of white papers to increase understanding of the most pressing environmental and economic challenges facing the sector, its partners’ current perspectives on these, and their visions for the future of the sector.

The inputs developed and submitted by these partners together with the work developed by the community in the context of current Climate-KIC innovation projects were used to inform this document. This process also identified some major opportunities for EIT Climate-KIC’s innovation community, and underpins the strategy behind its flagship forestry programme, which will be launched later in 2018.

This document synthesises our sectoral analysis and summarises key visions and challenges identified from our partners’ own white papers and project activities. From a methodological point of view, EIT Climate-KIC wishes to clarify that challenges and case studies related to deforestation in tropical countries have not been included; these themes fall under the remit of a specific sub-group of partners.

Supporting the Momentum of Paris: A Systems Approach to Accelerating Climate Finance Paper 2018

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Systems thinking approaches provide the potential to identify and measure how international public climate finance actors can interact:

  • With each other, given their own perspectives and constraints on what they can do, their future direction of travel, and direction of their peers.
  • With developing country financial systems, given emerging trends in green finance across the developing world, potentially unlocking new sources of finance.

    The systems approach frameworks developed in this project offer methods to enhance coordination and collaboration among actors both within the international public climate finance system, and during design of interventions within developing country contexts.

    The graphic overleaf provides an overview of needs and gaps drivers across developing countries, against the drivers of public finance actor perspectives.

1. While specific systems and needs are best evaluated on a country by country basis, short-ter- mism, growing risks and volatility are prevalent across developing country financial systems,impacting currency risk evaluation and potential public support for climate policies.

2. Access to finance, the costs of and suitability of current financial products, and lack of tools and methods to enact low carbon and climate resilient projects remain the key barriers to climate finance growth. Political and policy risks in the domestic environment are also cited as a key barrier to address in supporting private finance solutions.

3. The most prevalent instruments and solutions identified include blended or structured finance vehicles, utilising concessional finance; de-risking instruments such as guarantees or insurance; the provision of data and tools to manage uncertain risks; and policy support and technical assistance to reduce or manage political risks.

However, while such solutions are commonly called for, delivering them at scale require some of the major public finance actors in climate finance to adapt and change business models.

Author Padraig Oliver, Bella Tonkonogy, David Wang, Xueying Wang
Number of Pages 22 pp.
Primary Language English (en)
Region / Country Global
Keywords Climate Insurance
Related Resources
ENSO Index-Based Insurance for Agricultural Protection in Southern Peru Article 2018

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 The article presents a demonstration of methodology and application for one specific crop in a department of southern Peru. The purpose of this product is to streamline the ability of decision makers to provide financial relief to affected farmers during, and perhaps before, drought; extending the lead-time of the index that is used to trigger product payouts produces results of similar skill to a product trained on concurrent conditions. Issues explored in this work include basis risk, initial endowment requirements, product longevity, and the potential crossover from index-based insurance to forecast-based financing. The ability of such products to mitigate losses during and after drought may be advantageous in Peru and other regions with notable interannual climate variability. 

Author Eric Mortensen and Paul Block
Number of Pages 15 pp.
Primary Language English (en)
Region / Country Global
Peru
Keywords index-based insurance; forecast-based financing; agricultural planning; drought response;
Related Resources
Inclusive Insurance: Closing the Protection Gap for Emerging Customers Report 2018

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This report details the factors spurring inclusive insurance around the world. It reveals how both traditional and new insurers are breaking open new markets and reaching underserved customers through the use of innovative technologies, business models, product design, and partnerships, enabled by effective regulatory environments.

The report is based on extensive interviews with commercial insurers and insurance experts who are making inclusive insurance work as a successful business model. With insights from players at the frontlines, the report identifies the main challenges of providing insurance to lower income populations, as well as the solutions companies are using to overcome them.

The fndings for effectively serving this target market include:

  • Simplifying products so they are easy to understand, easy to enroll in, and easy to claim against. For institutions, such simple products engender trust and are lower cost to provide.
  • Finding new distribution channels and aggregators-from telcos to farmer cooperatives to banks—to identify and connect with low-income customers.
  • Leveraging digital channels and new “insurtech” (insurance technology) innovations to connect with, and serve, low-income customers.
  • Implementing new business models and products to provide and administer the risk mitigation solutions at scale that meet low-income customers’ needs.
Author Susy Cheston
Publisher Institute of International Finance (IIF); Center for financial inclusion (CFI)
Number of Pages 49 pp.
Primary Language English (en)
Region / Country Global
Keywords inclusive insurance, Financial Inclusion
Related Resources
Providing insurance responsibly Paper 2018

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Emerging consumers have a real need for protection and insurance holds the promise to reduce their vulnerability to risks while boosting productivity. At the same time, unserved market segments are usually unfamiliar with insurance, may have low trust in this tool or struggle to understand how it works and how it can generate long-term benefits. Therefore, for insurance to have a significant social and developmental impact, these specificities need to be taken into account through a responsible insurance provision approach. But what does responsible mean? 

This paper explores the seven principles of responsible insurance that can guide insurance providers to make the changes needed to become more responsible. If applied to the five stages of the value chain, namely 1) product design, 2) marketing, education, and sales, 3) enrolment, renewals, and premium collection, 4) policy administration and servicing and 5) claims management, they can bring substantial long-term benefits not only to clients, but also to providers. 

EIT Climate-KIC and the future of the forestry sector Paper 2018

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This resource appears in: Insurance

In 2016, EIT Climate-KIC began to explore these questions, and the role that forest management practices could play in enhancing climate innovation. Between July 2016 and March 2017, it organised three stakeholder workshops, in France, Switzerland and Finland, to better understand the current state of the European forestry sector. In November 2016, it launched a call for a series of white papers to increase understanding of the most pressing environmental and economic challenges facing the sector, its partners’ current perspectives on these, and their visions for the future of the sector.

The inputs developed and submitted by these partners together with the work developed by the community in the context of current Climate-KIC innovation projects were used to inform this document. This process also identified some major opportunities for EIT Climate-KIC’s innovation community, and underpins the strategy behind its flagship forestry programme, which will be launched later in 2018.

This document synthesises our sectoral analysis and summarises key visions and challenges identified from our partners’ own white papers and project activities. From a methodological point of view, EIT Climate-KIC wishes to clarify that challenges and case studies related to deforestation in tropical countries have not been included; these themes fall under the remit of a specific sub-group of partners.

EIT Climate-KIC and the future of the forestry sector Paper 2018

view page
This resource appears in: Insurance

In 2016, EIT Climate-KIC began to explore these questions, and the role that forest management practices could play in enhancing climate innovation. Between July 2016 and March 2017, it organised three stakeholder workshops, in France, Switzerland and Finland, to better understand the current state of the European forestry sector. In November 2016, it launched a call for a series of white papers to increase understanding of the most pressing environmental and economic challenges facing the sector, its partners’ current perspectives on these, and their visions for the future of the sector.

The inputs developed and submitted by these partners together with the work developed by the community in the context of current Climate-KIC innovation projects were used to inform this document. This process also identified some major opportunities for EIT Climate-KIC’s innovation community, and underpins the strategy behind its flagship forestry programme, which will be launched later in 2018.

This document synthesises our sectoral analysis and summarises key visions and challenges identified from our partners’ own white papers and project activities. From a methodological point of view, EIT Climate-KIC wishes to clarify that challenges and case studies related to deforestation in tropical countries have not been included; these themes fall under the remit of a specific sub-group of partners.

Study on the Microinsurance Industry in Nepal Paper 2018

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This report includes brief surveys undertaken to assess the supply and demand for microinsurance in Nepal, and the current challenges and way forward. It also reviews the players in the sector, the microinsurance products on offer and an examination of the risks faced by low-income households, their coping mechanisms and general awareness of the insurance products. A total of 303 respondents representing both microfinance institutions (MFIs) and non-MFI members participated in the survey out of which 153 were MFI members while the remaining 150 were not a member of any MFI.  

The survey found that advancing microinsurance in Nepal is a challenging task. Lack of cost-efficient distribution channels, awareness, adequate infrastructure, and human resources were cited as some of the major obstacles. Regulators and other stakeholders, therefore, need to work together to bring informal microinsurance, a non-regulated financial product used to cover different risks of people, into the mainstream insurance sector. In addition, creating awareness of insurance, developing appropriate products, and using cost-efficient distribution channels are needed to expand microinsurance.

MIGA Annual Report 2018 Report 2018

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MIGA provides political risk insurance and credit enhancement for cross-border private sector investors and lenders, in support of projects in developing member economies across the world. Marking its 30th year of operation, the Multilateral Investment Guarantee Agency (MIGA) has become the third leading institution among the MDBs in terms of mobilizing direct private capital to low- and middle-income countries. This year, MIGA issued a record $5.3 billion in political risk insurance and credit enhancement guarantees, helping finance $17.9 billion worth of projects in developing countries. New issuances and gross outstanding exposure—at $21.2 billion this year—almost doubled as compared to fiscal 2013.

Author Multilateral Investment Guarantee Agency
Number of Pages 27 pp.
Primary Language English (en)
Region / Country Global
Keywords Investment Guarantee, Insurance, Risk Management
Related Resources
Remote sensing for index insurance: An overview of findings and lessons learned for smallholder agriculture Report 2018 English (en) English (en)

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Index insurance is a type of agricultural insurance that can serve smallholder agricultural development and risk management by protecting assets and encouraging productive investments.  Limited availability, accessibility, quantity and poor quality of data on the ground are some of the primary technical constraints preventing scale-up and sustainability of index insurance. Data were the focus of the project “Improving Agricultural Risk Management in Sub-Saharan Africa: Remote Sensing for Index Insurance”.

This publication outlines the project, which investigated overcoming issues with ground data by testing innovative remote sensing methodologies. It aims to give people working in the insurance community, agricultural development and government an overview of remote sensing opportunities and challenges for index insurance, together with recommendations on where further work and investment is needed.

The project was financed by Agence Française de Développement with an additional contribution from the Belgian Federal Science Policy Office, and was carried out by the Weather Risk Management Facility of the International Fund for Agricultural Development and the World Food Programme. The Flemish Institute for Technological Research (VITO) provided significant contributions and support throughout the project.

For full information on the project methodologies, as well as detailed results and outcomes of the performance assessments and evaluation exercises, please refer to Remote Sensing for Index Insurance: Findings and Lessons Learned for Smallholder Agriculture.

Publisher website  -  English (en)

Document url  -  English (en)

Author Coleman, E., Dick, W., Gilliams, S., Piccard, I., Rispoli, F., & Stoppa, A.
Publisher IFAD - International Fund for Agricultural Development
Number of Pages 60 pp,
Primary Language English (en)
Region / Country Global
Keywords Index Insurance, Agriculture Insurance, Climate Insurance
Related Resources
EIT Climate-KIC and the future of the forestry sector Paper 2018

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This resource appears in: Insurance

In 2016, EIT Climate-KIC began to explore these questions, and the role that forest management practices could play in enhancing climate innovation. Between July 2016 and March 2017, it organised three stakeholder workshops, in France, Switzerland and Finland, to better understand the current state of the European forestry sector. In November 2016, it launched a call for a series of white papers to increase understanding of the most pressing environmental and economic challenges facing the sector, its partners’ current perspectives on these, and their visions for the future of the sector.

The inputs developed and submitted by these partners together with the work developed by the community in the context of current Climate-KIC innovation projects were used to inform this document. This process also identified some major opportunities for EIT Climate-KIC’s innovation community, and underpins the strategy behind its flagship forestry programme, which will be launched later in 2018.

This document synthesises our sectoral analysis and summarises key visions and challenges identified from our partners’ own white papers and project activities. From a methodological point of view, EIT Climate-KIC wishes to clarify that challenges and case studies related to deforestation in tropical countries have not been included; these themes fall under the remit of a specific sub-group of partners.

Supporting the Momentum of Paris: A Systems Approach to Accelerating Climate Finance Paper 2018

view page
This resource appears in: Insurance

Systems thinking approaches provide the potential to identify and measure how international public climate finance actors can interact:

  • With each other, given their own perspectives and constraints on what they can do, their future direction of travel, and direction of their peers.
  • With developing country financial systems, given emerging trends in green finance across the developing world, potentially unlocking new sources of finance.

    The systems approach frameworks developed in this project offer methods to enhance coordination and collaboration among actors both within the international public climate finance system, and during design of interventions within developing country contexts.

    The graphic overleaf provides an overview of needs and gaps drivers across developing countries, against the drivers of public finance actor perspectives.

1. While specific systems and needs are best evaluated on a country by country basis, short-ter- mism, growing risks and volatility are prevalent across developing country financial systems,impacting currency risk evaluation and potential public support for climate policies.

2. Access to finance, the costs of and suitability of current financial products, and lack of tools and methods to enact low carbon and climate resilient projects remain the key barriers to climate finance growth. Political and policy risks in the domestic environment are also cited as a key barrier to address in supporting private finance solutions.

3. The most prevalent instruments and solutions identified include blended or structured finance vehicles, utilising concessional finance; de-risking instruments such as guarantees or insurance; the provision of data and tools to manage uncertain risks; and policy support and technical assistance to reduce or manage political risks.

However, while such solutions are commonly called for, delivering them at scale require some of the major public finance actors in climate finance to adapt and change business models.

Author Padraig Oliver, Bella Tonkonogy, David Wang, Xueying Wang
Number of Pages 22 pp.
Primary Language English (en)
Region / Country Global
Keywords Climate Insurance
Related Resources
The Road to Launching "Bundled Microinsurance" in Fiji: Key Lessons Brief 2018

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As insurance sector stakeholders in various countries strive to develop microinsurance markets, an insurance scheme supplied by the industry at large - rather than by an individual insurer - appears attractive. Industry-backed insurance solutions can avoid or reduce common and potentially costly aspects, such as excessive competition, high administration costs and duplicated marketing efforts. Joint, industry-backed solutions may simplify and reinforce marketing messages and bring more insurer capital to bear, greatly expanding the volumes of policies issued to cover lives and businesses. This “group” approach can help to ensure that a strong customer base can be established that makes the product commercially viable, scalable and replicable across Pacific markets. Until 2017, this concept had not been tested in the Pacific.

Over a two-year period, the Pacific Financial Inclusion Programme (PFIP) worked with the National Financial Inclusion Taskforce (NFIT) Inclusive Insurance Working Group (IIWG) to create an industry-backed, bundled insurance project in Fiji. The bundled product was an opportunity to design a business model that used new partners to harness different specialist abilities, technologies and capabilities that ultimately delivered a compelling customer proposition for Fijians. This focus note shares some important conclusions from the project’s two-year journey from idea to product launch.

Make change happen: Getting insurance providers ready to better serve low-income households Paper 2018

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In order to serve low-income and emerging consumers effectively, insurance providers need to make significant changes to the way they do business. Changes can include finding cost-effective ways to understand the needs of a new market segment, reaching clients through different distribution channels, managing expenses to accommodate for lower margins per policy, and building systems to tackle large volumes of transactions. Insurers may also need to make changes to how they recruit, train, incentivize and retain their staff, how they structure their organization, the technologies they use, and the partners they work with. Starting a change process for an insurer can be daunting, especially given the difficulties in making the business case to serve this market segment. Successful implementation of change requires that the process is managed carefully with a systematic approach.

This paper presents a process that can be used by insurers to initiate and manage the changes required to serve low-income households. The paper presents the experiences of six partners who have tested this change process.

EIT Climate-KIC and the future of the forestry sector Paper 2018

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This resource appears in: Insurance

In 2016, EIT Climate-KIC began to explore these questions, and the role that forest management practices could play in enhancing climate innovation. Between July 2016 and March 2017, it organised three stakeholder workshops, in France, Switzerland and Finland, to better understand the current state of the European forestry sector. In November 2016, it launched a call for a series of white papers to increase understanding of the most pressing environmental and economic challenges facing the sector, its partners’ current perspectives on these, and their visions for the future of the sector.

The inputs developed and submitted by these partners together with the work developed by the community in the context of current Climate-KIC innovation projects were used to inform this document. This process also identified some major opportunities for EIT Climate-KIC’s innovation community, and underpins the strategy behind its flagship forestry programme, which will be launched later in 2018.

This document synthesises our sectoral analysis and summarises key visions and challenges identified from our partners’ own white papers and project activities. From a methodological point of view, EIT Climate-KIC wishes to clarify that challenges and case studies related to deforestation in tropical countries have not been included; these themes fall under the remit of a specific sub-group of partners.

EIT Climate-KIC and the future of the forestry sector Paper 2018

view page
This resource appears in: Insurance

In 2016, EIT Climate-KIC began to explore these questions, and the role that forest management practices could play in enhancing climate innovation. Between July 2016 and March 2017, it organised three stakeholder workshops, in France, Switzerland and Finland, to better understand the current state of the European forestry sector. In November 2016, it launched a call for a series of white papers to increase understanding of the most pressing environmental and economic challenges facing the sector, its partners’ current perspectives on these, and their visions for the future of the sector.

The inputs developed and submitted by these partners together with the work developed by the community in the context of current Climate-KIC innovation projects were used to inform this document. This process also identified some major opportunities for EIT Climate-KIC’s innovation community, and underpins the strategy behind its flagship forestry programme, which will be launched later in 2018.

This document synthesises our sectoral analysis and summarises key visions and challenges identified from our partners’ own white papers and project activities. From a methodological point of view, EIT Climate-KIC wishes to clarify that challenges and case studies related to deforestation in tropical countries have not been included; these themes fall under the remit of a specific sub-group of partners.

"3-D" Client Value Assessment tool Toolkit 2018

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Smallholder farmers are exposed to a range of agricultural risks. While traditional insurance products are often inaccessible to them, index insurance products might offer an affordable and feasible alternative. But poorly designed index insurance can create more risks than it mitigates. Assessing the benefits that index insurance brings to clients is essential, but has proved challenging.

The 3-D Client Value Assessment tool allows insurance providers to measure the value of their agricultural index insurance products. Merging the Facility’s PACE tool with the AMA Innovation Lab’s calculations for Minimum Quality Standards, this tool provides a multi-dimensional understanding of the value proposition for potential or existing clients.

The tool was developed by the Facility and the Feed the Future Innovation Lab for Assets and Market Access (AMA Innovation Lab) at UC Davis, with support from EA Consultants, as part of the Global Action Network, a project supported by USAID in collaboration with UC Davis.

Listed below are the various components of the 3-D Client Value Assessment Toolkit. The toolkit consists of the tool and supporting documents that can be used to perform the client value analyses. We recommend that you start with the Technical Guide (listed at the top), which explains how to use each of the components.​

Watch the recording of a 60-minute webinar organized on March 29, 2018 in which the tool presented for the first time.​

Contents of the tool:

  • Technical guide
    • Provides guidance on how to conduct a 3-D Analysis of Client Value, using the 3-D Tool and associated documents described below.
  • 3-D tool 
    • Centerpiece of the analysis, which looks at client value across 14 indicators and provides indications on how obtain a scoring for each of them.
  • Workplan 
    • Plan aims to support the planning of a 3-D Analysis of Client Value. 
  • Administrative data checklist 
    • List summarizes important information, administrative data and documentations to collect throughout the analysis.
  • Interview guides 
    • File contains interview guides for covered farmers, management, and sales staff or agents.
  • Working template 
    • Provides step-by-step guidance for analyzing the data collected through the analysis for each indicator.
The role of insurance in integrated disaster and climate risk management: evidence and lessons learned 2017 English (en)

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This paper on the role of insurance in integrated disaster and climate risk management published by the GIZ presents an empirical evidence related to when and how insurance can contribute to disaster and climate risk management. Aspects explored include the contribution of insurance to relating to, or even creating the macro-conditions for, resilience to disasters in terms of public finance, economic growth and good governance; the contribution of insurance to risk prevention, preparedness, response and recovery; and the factors that influence the provision of insurance by companies and governments, as well as the uptake of insurance by governments and households. Findings and conclusions from the empirical review are provided, and links are drawn with the key concepts of risk layering and Integrated Climate Risk Management. 

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Insurance of weather and climate-related disaster risk Paper 2017

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The study builds on the EU Adaptation Strategy (EC, 2013a) and the Green Paper on the insurance of natural and man-made disasters (EC, 2013b), and addresses the objective of encouraging the use of insurance to manage weather and climate-related disaster risk. More specifically, the study supports the EU Adaptation Strategy through: (1) Increasing the knowledge base by collecting and providing information with regards to insurance coverage, mechanisms and cost-effectiveness, including preventive capacity; (2) Increasing awareness, promoting further action and defining the next steps in insuring extreme weather events​

Author Ramboll; IVM
Publisher European Commission
Primary Language English (en)
Region / Country Europe
Keywords bad weather, damage, environmental risk prevention, Insurance, man-made disaster, Natural Disaster, report
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Insuring well-being? buyer's remorse and peace of mind effects from insurance 2017

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This paper estimates the causal effects of index insurance coverage on subjective well-being among livestock herders in southern Ethiopia. The randomization of incentives to purchase index-based livestock insurance and three rounds of panel data are exploited to separately identify ex ante welfare gains from insurance that reduces risk exposure and ex post buyer's remorse effects that may arise after the resolution of uncertainty. Insurance coverage currently in force generates subjective well-being gains that are significantly higher than the buyer's remorse effect of an insurance that lapsed without paying out. Given the temporal correlation in insurance purchase propensity, failure to control for potential buyer's remorse effects can bias downward estimates of welfare gains from current insurance coverage.

Author Hirfrfot Kibrom Tafere; Barrett Christopher B.; Lentz Erin; Ayana Birhanu T.
Publisher World Bank Group
Washington, D.C
Number of Pages 49 pp.
Volume / Issue# 1
Primary Language English (en)
Region / Country Africa, Northern Africa
Ethiopia
Keywords Index-Based Insurance
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Regulatory Impact Assessments: Microinsurance Regulations in Peru and the Philippines Report 2017

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Insurance supervisors in emerging and developing markets have been developing policy, regulatory and supervisory approaches to foster markets for inclusive insurance for more than a decade. With the support and collaboration of other government authorities, such as their central banks, and development cooperation agencies, several markets have undergone transformative changes. Looking back, what has been the impact of these measures? What can other supervisors learn by comparing the experience of countries that have already been through the process? The Access to Insurance Initiative (A2ii) and the International Labour Organization (ILO) through its Impact Insurance Facility (IIF) have commissioned this study to assess the impact of microinsurance regulatory frameworks on developing inclusive insurance markets by way of a Regulatory Impact Assessment (RIA). The Philippines and Peru have been selected as case studies for two reasons. The first is, being early pioneers of measures to develop microinsurance via supportive policy and regulatory approaches, the two countries have among the longest experience with microinsurance regulations and thus offer a wealth of observed experience and rich lessons. Second, both countries took distinctively unique approaches based on their respective policy objectives and local market contexts, and the strategies adopted, thus enabling insights to be drawn from meaningful comparison of the measures each supervisor took. 

Workshop on Development of Aquaculture Insurance System for Small-Scale Farmers Report 2017 English (en)

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The workshop aimed to identify policy and technical measures that would make insurance available and accessible to small-scale aquaculture farmers. Three commissioned papers and seven supplementary papers and presentations informed the discussions, which led to a set of recommendations addressed to the participating countries as well as to other developing countries and a specific follow-up activity in Thailand with a possible FAO collaborative assistance.

The workshop was a collaboration between FAO and Kasetsart University (KU) in Bangkok implemented through a Letter of Agreement with the Center for Applied Economics Research, KU. It was held at the Faculty of Economics of which comprised two days of meetings. The first, on 20 September 2016, had a regional scope that discussed the experiences in and challenges to aquaculture insurance. The participants were experts from China, the Philippines, Singapore, Thailand and Viet Nam. The second workshop, on 21 September 2016, focused on the prospects of a viable and sustainable aquaculture insurance for the shrimp aquaculture industry of Thailand. The deliberations were informed by a field study of the demand for insurance by the sector. It was joined by officers and members of shrimp farmers’ cooperatives from five provinces of Thailand and the participants of the first workshop.

The workshop attained its objectives. It also facilitated these results: (i) made farmers, farmer advisers, researchers and academics more familiar with the insurance business and technical requirements of insurers, (ii) made insurers become more familiar with the circumstances and the needs of aquaculture farmers, (iii) confirmed that insurers continue to view aquaculture as a high-risk industry, (iv) highlighted the need to incorporate risk assessment and management in the development of better farm management practices in line with the requirements of insurance, and (v) confirmed the usefulness of bundling credit and insurance in the development of institutional services for farmers.

Report of the Workshop on Development of Aquaculture Insurance System for Small-Scale Farmers  -  English (en)

Author Food and Agriculture Organization of the United Nations (FAO)
Publisher Food and Agriculture Organization of the United Nations (FAO)
Rome, Italy
Number of Pages 51 pp.
Primary Language English (en)
Region / Country Global
Keywords Insurance, aquaculture, credit, aquaculture insurance
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Index-Based Insurance in Developing Countries: Rational Neglect? Paper 2017

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Microinsurance adoption in developing countries is low, despite its potential to foster economic growth. Recent research is not able to explain the low take-up rates within the neoclassical framework. In this paper, Author suggest rational explanations of farmers’ low take-up rates of index-based weather insurance by setting up a stochastic model within an expected utility framework. This approach stands in contrast to previous research that is mainly concerned about convincing farmers of the insurance product without taking into account the (objective) failure of the contract for many farmers. 

Author Daniel Würtenberger
Number of Pages 35 pp.
Primary Language English (en)
Region / Country Global
Keywords weather insurace; basis risk; microinsurance; developing countries; understanding of insurance products; trust in insurer
Related Resources
The Landscape of Microinsurance in Sri Lanka 2016 Document 2016

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“The Landscape of Microinsurane in Sri Lanka”, carried out by the Microinsurance Network and Munich Re Foundation and based on 2013-2016 data. This study is part of a series of microinsurance landscape studies which feed into the World Map of Microinsurance, an initiative mapping the landscape of microinsurance worldwide. According to recent data, there are currently 2.6 billion SIM cards in use across Asia, highlighting the huge potential for growth for microinsurance through this channel. TSP policies across Asia offer coverage for life, personal accident (PA) and health (hospital cash). However, product innovation remains a challenge with most of the microinsurance products having similar features: The majority are voluntary, include loyalty aspects, and are paid through airtime. This new Landscape Study provides important new information on opportunities for and challenges faced by microinsurance in Sri Lanka. With around 7% microinsur­ance penetration in the country, there is still much scope for growth in reaching the low-income population.

L’Afrique subsaharienne, nouvelle frontière des assureurs ? Document 2016 French (fr)

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Depuis quelques années, l’Afrique suscite l’intérêt grandissant des acteurs de l’assurance, qui ont investi le secteur, mais non sans difficultés. À l’échelle mondiale, l’Afrique ne représente que 1,5 % du marché global, alors qu’elle pèse pour 13 % de la population mondiale.

Plusieurs facteurs expliquent cette situation. Tout d’abord, la faiblesse des revenus moyens des particuliers. Avant de payer des cotisations d’assurance, il faut pouvoir manger, se loger, etc. Autant de priorités qui relèguent l’assurance dans la catégorie des dépenses « somptuaires » et donnent à beaucoup l’impression que les assurances obligatoires sont des taxes supplémentaires. La perception et la confiance dans les assureurs en pâtissent. À cela s’ajoutent un taux de bancarisation encore faible en Afrique subsaharienne et la vivacité des réseaux de solidarité traditionnelle. Malgré ses freins, l’assurance dispose d’un potentiel de développement important sur le continent, à condition que les acteurs privés adaptent leurs offres et leurs outils de distribution aux besoins et aux capacités contributives des Africains.

Ce nouveau numéro de Secteur Privé & Développement propose d’explorer les opportunités et les contraintes de l’assurance en Afrique, en présentant les analyses de plusieurs parties prenantes du secteur (assureurs, chercheurs, bailleurs, etc.).

Fondateur du groupe Activa, Richard Lowe nous offre une vue d’ensemble de l’assurance en Afrique (pages 6-8), tandis que Pathé Dione, fondateur du groupe Sunu, apporte lui un éclairage plus spécifique sur les marchés d’Afrique francophone (pages 15-17). Le secteur de l’assurance a le potentiel pour participer au développement de l’Afrique, estiment Garance Wattez-Richard et Amélie de Montchalin du groupe AXA (pages 9-12) : il contribue à stimuler la croissance, à accroitre la résilience des économies locales face aux évènements extrêmes et à favoriser la solidarité entre les individus. À cela s’ajoute sa capacité, pour l’instant limitée, à canaliser l’épargne des ménages et à investir à long terme dans les entreprises et les projets d’infrastructure en faveur du développement local, comme l’explique Frédéric Baccelli, directeur général d’Allianz Africa (pages 13-14).

L’essor de l’assurance en Afrique se fera notamment via la microassurance destinée aux actifs de l’économie informelle, et ce malgré les nombreux défis à relever comme le montrent Eneida del Hierro et Aurore Lambert de l’AFD (pages 30-34), ainsi que les expériences conduites en la matière au Maroc, en Inde, en Tanzanie ou encore au Mexique (pages 35-38). Pour les petits exploitants agricoles du continent, la mise en place de systèmes d’assurance, dite indicielle, qui permet de faciliter l’indemnisation en cas de mauvais rendement ou d’aléas climatiques, constitue une piste prometteuse (pages 18-21 et 26-29).

S’ils veulent séduire l’Afrique, les assureurs sont au défi d’inventer de nouvelles formes de distribution moins coûteuses. La téléphonie mobile apparait comme un vecteur prometteur, nous explique Frédéric Bouchet, du groupe de courtage d’assurances et de réassurances Gras Savoye (pages 39-41)

Lien vers la publication  -  French (fr)

Author Proparco
Publisher Proparco
Paris, France
Number of Pages 23
Primary Language French (fr)
Region / Country Global, Africa
Keywords Infrastructure, Micro-assurance, Assurance indicielle, Téléphonie mobile
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The State of Microinsurance 2016 Document 2016 English (en)

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This second edition of the Microinsurance Network's annual magazine presents the insights and views of 22 experts in the field with regards to innovative developments in product design, distribution and regulation. Topics discussed include behavioural economics in microinsurance, the contribution of insurance to capital market development, and the possibility of benchmarking microinsurance based on key performance indicators. For the first time, the magazine includes a debate which focuses on the role of private health insurance in achieving universal health coverage. With regards to agriculture insurance, one article features case studies demonstrating the concept of bundling with financial and non-financial services and another article focuses on non-climate risks affecting Sahelian livestock herders. Interviews were also conducted to capture valuable insights from Democrance, RisKnoT, BIMA, Swiss Re and MicroSave. Contributions were provided by a number of organisations supporting microinsurance including Cenfri, Inclusivity Solutions, MicroInsurance Centre, Abt Associates, the UK Royal Institute of International Affairs, Access to Insurance Initiative, MicroEnsure, Acting for Life and the ILO’s Impact Insurance Facility among others.

The State of Microinsurance 2016  -  English (en)

The State of the Microinsurance (SoM) Newsletter 2016 English (en)

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The second issue feature some of the following topics: 

  • Breaking free to fund the growth frontier – the link between insurance and capital market development in Sub-Saharan Africa
  • Benchmarking in microinsurance
  • Implementation of regulatory and supervisory standards for access to insurance in Latin America and the Caribbean
  • Successful Mobile Operating Schemes- the MicroEnsure Experience
  • Index-insurance and non-climate-related risks for Sahelian herders
  • Building scale in agriculture insurance through bundling with financial and non-financial services
The State of Microinsurance  -  English (en)

Responsible Mobile Insurance Paper 2015

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This GIZ discussion paper on “Responsible Mobile Insurance”  assesses new initiative in the field of mobile insurance through the lens of responsible finance to determine the risk and potential responsible practices. Responsible Finance has recently developed as a coordinated approach aimed at driving responsible practices in financial inclusion based on public and private sector interventions that encourage and assist financial services providers and their clients in improving their understanding and practices to create more transparent, inclusive, and equitable financial markets balanced in favour of all income groups. Mobile insurance has huge potential due to the high mobile penetration and the growing mobile money industry and is driven by a number of factors and stakeholders.

Author Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Publisher Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Eschborn, Germany
Number of Pages 28 pp.
Primary Language English (en)
Region / Country Global
Keywords responsible finance, Insurance, mobile insurance
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Scaling Up Index Insurance for Smallholder Farmers: Recent Evidence and Insights Report 2015 English (en)

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The new CGAP report on “Scaling Up Index Insurance for Smallholder Farmers: Recent Evidence and Insights” that explores evidence from five case studies that have made significant progress in addressing the challenge of insuring poor smallholder farmers and pastoralists in the developing world. There are a few common features that appear within these case studies: i) explicitly targeting obstacles to improving farmer income; ii) integration of insurance with other development interventions; iii) giving farmers a voice in the design of products; iv) investing in local capacity; and v) investing in science-based index development. The purpose of this report is to inform the ongoing debate about the viability of scaling up index-based insurance for vulnerable smallholder farmers in the developing world  and it suggests the need to reassess arguments that lack of demand and practical implementation challenges prevent index-based insurance from being a useful tool to reduce rural poverty.

Scaling up index insurance for smallholder farmers  -  English (en)

Author Greatrex H, Hansen JW, Garvin S, Diro R, Blakeley S, Le Guen M, Rao KN, Osgood, DE.
Publisher CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS)
Copenhagen, Denmark
Number of Pages 32 pp.
Primary Language English (en)
Region / Country Global
India, Ethiopia, Senegal, Mongolia, Kenya
Keywords Index-Based Insurance, Insurance, Index Insurance
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The Landscape of Microinsurance in Africa 2015 Document 2015 English (en)

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The study provides an in depth analysis of the evolution of microinsurance in the African region in terms of products, delivery channels, regulations and profitability indicators to the industry, building upon the data released in the African Landscape Briefing Note in November last year.

 

The landscape measured a 63% premium growth, on an aggregate comparative basis, since the last landscape study in 2011, with 61.8 m people covered by at least one microinsurance policy by the end of 2014, compared to 44.4 m people in 2011. A total coverage ratio of 5.4% of the total population was measured across the African region, up from 4.4% in 2011. This is comparable to the coverage ratio in Asia and Oceania at 4.3% (2012), though still below that in the Latin America and Caribbean region at 7.9% (2013), as shown in the World Map of Microinsurance (WMM) which incorporated data from the Africa landscape and previous studies.

 

About the World Map of Microinsurance

The World Map of Microinsurance (WMM) is an interactive map that enables insurers and microinsurance practitioners to gain a birds-eye view on the landscape of microinsurance worldwide, and to search and extract sector-specific data by region to gain insights into trends in microinsurance, fostering better decision-making at an operational and policy level. A series of tri-annual regional landscape studies, including the current Landscape of Microinsurance Africa 2015, provide the data underpinning the map. worldmapofmicroinsurance.org

The Landscape of Microinsurance in Africa 2015  -  English (en)

Microseguros agropecuarios y gestión integral de riesgos en Centroamérica y la República Dominicana Book 2015 Spanish (es)

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El documento analiza las dificultades asociadas a la oferta de seguros y microseguros agropecuarios de Centroamérica y la República Dominicana, región en la cual el reto para instrumentar mecanismos de aseguramiento parte desde la creación de leyes específicas, pasando por instauración de una institución pública responsable de los seguros y microseguros, hasta la implementación de facilidades para la adquisición por parte de los productores de bajos ingresos en la zona rural. 

Microseguros agropecuarios y gestión integral de riesgos en Centroamérica y la República Dominicana  -  Spanish (es)

Author Iraheta, José M., Arroyo, José M.
Publisher Comisión Económica para América Latina y el Caribe
Number of Pages 224
Primary Language Spanish (es)
Region / Country Global, Americas, Central America
Keywords Microseguros agropecuarios, Gestión del riesgo
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Landscape of Microinsurance in Ghana 2015: supply and demand side report Report 2015

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Microinsurance is an important mechanism for managing uncertainties and vulnerabilities of low-income segments of the population. In Ghana, microinsurance industry development is being spearheaded by the National Insurance Commission (NIC) to expand the insurance market and facilitate improved access to and the usage of insurance services by MSMEs and low-income households. The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), provides technical assistance to NIC and other key stakeholders in the insurance sector to achieve this objective. In pursuance of this, the NIC has introduced the Market Conduct (Microinsurance) Rules in order to guide the microinsurance segment of the insurance market. As a follow up to a 2012 survey, the NIC working with GIZ contracted MicroInsurance Centre (MIC) and CDC Consult Limited to conduct a Microinsurance Landscape Survey for 2014. The survey focused on both the supply and demand sides of the market. The supply side sought to throw more light on the status of the microinsurance sector in Ghana; solicit detailed feedback from the insurance industry on the current level of adoption of the Market Conduct (Microinsurance) Rules; identify examples of good practices in the microinsurance market and investigate their promotion. The demand side focused on assessing the current level of knowledge, attitude and perception of microinsurance clients.

The ILO’s Impact Insurance Facility - Annual Report 2014 Report 2015

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The ILO’s Impact Insurance Facility Annual Report 2014 highlights ILO’s achievements over the last year.

In 2014, ILO rebranded the activities to adopt a broader approach to enable insurance to fulfill its potential to achieve social and economic development objectives. Through three main initiatives: a) facilitating market development in select countries, b) supporting and learning from innovative insurance approaches, and c) by building the capacity of insurers and other stakeholders to be more impactful.

Microseguros agropecuarios y gestión integral de riesgos en Centroamérica y la República Dominicana Book 2015 Spanish (es)

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En Centroamérica y República Dominicana se han llevado a cabo diversos esfuerzos para promover los seguros y microseguros agropecuarios considerando la creación de leyes, la instauración de política pública y la implementación de facilidades para la adquisición por parte de los productores de bajos ingresos del área rural. En tal contexto, el documento analiza  los microseguros agropecuarios y la gestión integral de riesgos, las experiencias y lecciones de microseguros en economías en desarrollo, la necesidad los microseguros agropecuarios en Costa Rica, la factibilidad para desarrollar los microseguros agropecuarios en El Salvador, Honduras, Nicaragua y Panamá. Finalmente presenta conclusiones por país y factibilidad de los seguros y microseguros agropecuarios.

Microseguros agropecuarios y gestión integral de riesgos en Centroamérica y la República Dominicana: lineamientos estratégicos para su desarrollo y fortalecimiento  -  Spanish (es)

Author Iraheta, J. M. & Arroyo, J. M.
Publisher Comisión Económica para América Latina y el Caribe
Number of Pages 224
Primary Language Spanish (es)
Region / Country Global, Americas
Related Resources
Remote Sensing for Index Insurance: findings and lessons so far Paper 2015

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Weather Risk Management Facility, a joint initiative between the International Fund for Agricultural Development and the World Food Programme, is implementing a project to evaluate the feasibility of remote sensing for index insurance to fill the critical gap of quality, long-term weather and yield data on-the-ground.

This publication gives an overview of the project and documents lessons so far after the first test season of developing and analysing remote sensing products for index insurance to accurately depict yield loss in smallholder farming due to weather and other perils, and be scalable in index insurance schemes.

The focus is Senegal, with outcomes intended for entire index insurance sector. Findings so far relate to the historical and 2013 crop season performance of each remote sensing methodology when assessed against on-the-ground yield and rainfall data, and cover lessons on: 

  1. Crop and area performance
  2. Design and calibration of indices
  3. Defining Unit Areas of Insurance
  4. Crop maps and masks

Following this test season, the project is continuing to develop, test and analyse the remote sensing methodologies for two more seasons, with an overall evaluation taking place in 2016, after which conclusions will be shared. 

Access to Insurance Initiative (A2ii) Annual Report Report 2015

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The A2ii team is proud to present its annual report for the reporting period October 2014 to September 2015.
Find out how the A2ii as implementation partner of the IAIS on inclusive insurance inspired and supported insurance supervisors during the last 12 months!
Learn more about inclusive insurance and the current regulatory landscape and how the A2ii worked with the IAIS in supporting implementation of the ICPs and supervisory capacity building at a regional level.

Agriculture, Microinsurance, and Rural Development Paper 2014 English (en)

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This paper produced by the Microinsurance Network's Agriculture Working Group analyses the role of agricultural microinsurance as a rural development tool, exploring how products such as index-based crop insurance could address the constraints smallholders typically face. The paper also looks at:

·         Challenges with parametric insurance and how they can be overcome

·         Mapping constraints that affect smallholders and potential intervention strategies

·         How effective agricultural microinsurance can help smallholders stabilise their income and increase production

·         Recommendations to develop holistic agriculture insurance models

Paper  -  English (en)

Author Silvia Müller, Gaby Ramm, Roland Steinmann
Publisher Microinsurance Network
Luxembourg
Number of Pages 44 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Genèse et essor de la micro-assurance agricole Document 2014 French (fr)

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Les efforts visant à améliorer l’accès des agriculteurs aux produits d’assurance agricole n’ont jamais été aussi intensifs. Les préoccupations de sécurité alimentaire – en situation de demande croissante, de volatilité des prix des produits de base et de changement climatique – renforcent l’intérêt pour l’assurance agricole, ont fait l’objet de plusieurs rapports officiels et officieux et ont engendré plusieurs projets pilotes conduits par des organismes privés agissant seuls ou dans le cadre de partenariats publics-privés. Ces préoccupations trouvent un écho dans le Plan d’action sur la volatilité des prix alimentaires et sur l’agriculture, publié par le G20 de Paris en juin 2011 (voir l’Annexe D – Initiatives de coordination). Les nouvelles technologies participent au progrès et ouvrent de nouvelles perspectives. Dans le monde émergent, les volumes de primes d’assurance agricole augmentent fortement dans quelques pays – Inde, Chine, Mexique, Brésil – grâce à des soutiens publics forts. Ainsi, le nombre de primes souscrites dans l’agriculture atteint des niveaux inégalés. En l’absence de soutien public généreux, par contre, le développement des marchés est lent. En outre, aucun produit indiciel pour petits exploitants agricoles n’a encore été commercialisé avec succès en dehors de l’Inde.

L’intérêt pour l’assurance agricole procède de son impact potentiel sur la pérennisation des exploitations agricoles. En effet, l’assurance permet aux agriculteurs, malgré une mauvaise récolte, de conserver leurs outils de production (actifs) et leur capacité à réinvestir pour préparer la prochaine campagne. On attend aussi de l’assurance qu’elle ouvre l’accès au marché du crédit et favorise les prêts agricoles, ce qui peut être porteur d’investissements complémentaires dans la productivité. La stabilisation du pouvoir d’achat des agriculteurs peut aussi, à son tour, stimuler l’activité économique non agricole en zone rurale. L’assurance agricole ne peut toutefois être considérée comme un substitut à l’adaptation au changement climatique qui exigera une gamme complète d’interventions.

Le présent document offre un panorama des évolutions et débats actuels entourant le secteur de l’assurance agricole sur les marchés émergents avec un accent particulier sur les enjeux spécifiques des produits d’assurance indiciels.

Le rapport commence par une mise en contexte décrivant comment l’assurance agricole est apparue en Europe et en Amérique du Nord avant de conquérir les autres continents, puis aborde l’état actuel des marchés agricoles. Des évolutions récentes ont vu se développer les systèmes d’assurance indicielle qui sont traités dans le chapitre suivant, lui-même suivi d’une réflexion sur les acteurs impliqués dans l’offre de ces polices d’assurance assortie d’une synthèse de la littérature récente abordant cette thématique et mettant en exergue ce que l’on peut apprendre concernant la valeur de ces produits. Quatre études de cas – Brésil, Maroc, Sénégal et Chine – décrivent les exemples de divers pays et de leurs démarches d’instauration de l’assurance agricole en se concentrant sur la proposition de valeur de chaque système. 

Lien vers la publication  -  French (fr)

Author Microinsurance Network
Publisher Microinsurance Network
Number of Pages 88
Primary Language French (fr)
Region / Country Global, Africa, Americas, Asia, Europe, Oceania
Brazil, Morocco, Senegal, China
Keywords Agricultural Microinsurance, Index-Based Insurance
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Exploring new frontiers: the potential of impact investments in microinsurance Paper 2014 English (en)

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This document serves as a synthesis of high level findings from a review of the landscape of microinsurance investments and serves to identify key opportunities and challenges. The document also seeks to provide key recommendations and the action, steps and support mechanisms required to catalyse investments in microinsurance.

Paper  -  English (en)

Author Jeremy Leach, Sandisiwe Ncube, and Anand Menon
Publisher Microinsurance network
Number of Pages 50 pp.
Primary Language English (en)
Region / Country Global
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Beyond Slogans: Good Practices in Promoting Microinsurance Products Paper 2013 English (en)

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This paper provides microinsurance providers and their distribution partners with a ten-step promotional planning model on developing and implementing promotional campaigns for microinsurance products. These steps can help overcome barriers such as lack of trust in providers, low financial and insurance literacy as well as improve the results in microinsurance programs.

Paper  -  English (en)

Author Lee, N.R.; Solana, J.M.
Publisher ILO and the Munich Re Foundation
Number of Pages 59 pp.
Volume / Issue# 22
Primary Language English (en)
Region / Country Global
Related Resources
Index based livestock insurance (IBLI) Multimedia 2013 English (en)

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This is a video of a mobile-based platform to help livestock farmers in Kenya purchase livestock insurance and acquire value added services.

Index based livestock insurance (IBLI)  -  English (en)



Insuring against the Weather Technical Note 2013 English (en)

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Weather risk remains a major challenge to farming in poor countries that face frequent droughts. Recent evidence on index- based weather insurance points to low take-up rates largely due to basis risk (i.e. residual risk left uninsured by the index). Us- ing randomized control trials, we study to what extent traditional groups can be utilized to mitigate basis risk by retailing insur- ance through these groups. We find that selling insurance through iddirs, with pre-defined sharing rules, increases take-up— suggesting that groups are better placed to reduce basis risk. We also find that insurance strengthens existing risk-sharing be- havior within groups, for example, by improving access to loans from the iddir to cover crop losses and improving perceived ability to finance emergencies. Insurance has also improved household welfare in the short term considered in this study, albeit to a limited extent.

Research Note  -  English (en)

Author Guush Berhane, Daniel Clarke, Stefan Dercon, Ruth Vargas Hill, and Alemayehu Seyoum Taffesse
Number of Pages 2 pp.
Primary Language English (en)
Region / Country Global
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Process mapping for microinsurance operations Toolkit 2012 English (en)

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IFAD has developed the tool kit “Process mapping for microinsurance operations” to better understand and improve business processes and client value. This manual presents a ‘process mapping’ technique that can support institutions in self-analysis by assisting them in understanding, developing and improving business processes. The toolkit describes how a process map can be drawn, analyzed and adapted for the microinsurance sector, as a complement to the above mentioned document. This manual was specifically developed as a suplement to Microinsurance product development for microfinance providers.

Process mapping for microinsurance operations  -  English (en)

Author Roland Steinmann
Publisher IFAD
Rome, Italy
Number of Pages 64 pp.
Primary Language English (en)
Region / Country Global
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Protecting the poor: A microinsurance compendium - Volume II Book 2012

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Published by the ILO and the Munich Re Foundation, the second volume of the Microinsurance Compendium examines the recent developments and achievements of the microinsurance sector by bringing together the latest thinking of leading academics, actuaries, and insurance and development professionals in the microinsurance field.

Since the publication of the first edition, the landscape of microinsurance has changed enormously. With almost 500 million people now covered by microinsurance, the book discusses the main trends and evolution of the sector while also considering where it currently stands from a global point of view. The focus of the book is on how insurance products and services can successfully tackle the needs of low-income populations and help to reduce their vulnerability.

Essential reading for insurance professionals, practitioners and anyone involved with offering insurance services to low-income persons, the second volume covers many of the new challenges faced by stakeholders in the sector. These include the potential impact of microinsurance, consumer education and client value, designing products for specific target groups, distribution and intermediation, price with limited data, conducive regulations and appropriate consumer protection, and innovations in technology.

We would like to highlight part 4 of the book that covers small holder farmer insurance and livestock insurance.

Author Craig Churchill and Michal Matul
Publisher ILO and the Munich Re Foundation
Number of Pages 36 pp.
Volume / Issue# II volume
Primary Language English (en)
Region / Country Global
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Pathways Towards Greater Impact: Better Microinsurance Models, Products and Processes for MFIs Paper 2012 English (en)

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This paper provides a comprehensive review of the challenges facing MFIs that provide insurance to low-income persons and microenterprises, as well as their successes, with a focus on three topics: (1) the evolution of products, (2) the range of institutional options, and (3) improving business processes.

Emerging from this review are ten key recommendations for MFIs involved in microinsurance:

  1. Understand market needs and preferences
  2. Prioritize savings
  3. Make mandatory cover valuable
  4. Proactively develop the product menu
  5. Improve claims processing
  6. Apply holistic risk management
  7. Create a demonstration effect
  8. Structure for success
  9. Build insurance capacity
  10. Monitor performance
Paper  -  English (en)

Author Craig Churchill, Aparna Dalal, Josh Ling
Publisher International Labour Organization (ILO)
Number of Pages 61 pp.
Primary Language English (en)
Region / Country Global
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Briefing Note: The Landscape of Microinsurance in Africa 2012 Brief 2012

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This briefing note, officially launched at the 8th International Microinsurance Conference in Dar es Salaam, Tanzania, on November 8, 2012, presents the summary of the findings of the upcoming Landscape of Microinsurance in Africa 2012 publication. The study provides up-to-date data on micro-insurance providers, products, distribution channels, and market trends for 39 African countries and includes a high level overview of regulatory developments.

The study has accomplished several objectives: the description of recent trends in microinsurance on the continent; the identification of the gaps in access to microinsurance, and the identification of key bottlenecks to the development of a viable and sustainable micro-insurance sector in Africa.

The most striking finding is that microinsurance coverage in Africa has grown tremendously over the past few years. The prior 2010 Africa Landscape study identified a total of 14.7 million lives and properties covered by microinsurance in 32 countries. The current study identified 44.4 million lives and properties covered in 39 countries, a growth of over 300% between 2008 and 2011.

Although microinsurance coverage has dramatically increased, the market described in 2008 has not significantly changed in that the vast majority of Africans with insurance coverage, are covered by life insurance. Other insurance products related to health, agriculture, accidents and property, are not as common on the continent, which is inconsistent with demand especially for health insurance. This finding should drive the relevant stakeholders to take steps towards addressing this shortcoming.

Author Michael J. McCord, Roland Steinmann, Molly Ingram
Publisher MFW4A/GIZ, Munich Re Foundation in partnership with AfDB, Microinsurance Network, Microinsurance Innovation Facilty/ILO
Number of Pages 11 pp.
Primary Language English (en)
Region / Country Global
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State of Knowledge Report - Market Development for Weather Index Insurance Key Considerations for Sustainability and Scale Up Paper 2011

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State  of  Knowledge  Reports  (SKRs)   focuses  on  developing  markets  for weather  index  insurance.    

Three  general  recommendations  emerge  from  this  SKR  and  the  preceding  reports  in  this  series.    

1. From  the  outset,  projects  supporting  index  insurance  must  formulate  an  evaluation  plan   related  to  targeted  development  objectives.  When  derived  from  a  clearly  defined  causal   theory  of  change,  evaluation  strategies  can  aid  investment  and  expansion  decisions.  

2. Rather  than  providing  premium  subsidies,  donor  and  government  funds  should  be  used  to   invest  in  building  local  capacity  and  to  establish  the  proper  institutional  frameworks  that  can   support  the  development  and  growth  of  index  insurance  markets  in  lower  income  countries.  

3. To  address  challenges  in  the  market  development  process,  product  design  should  focus  on:  products  for  risk  aggregators; Insuring  against  the  broader  economic  consequences  of  weather  risk,  not  just  direct   losses;  Insuring  against  low-­‐frequency,  catastrophic  risks;  and   c. Reducing  costs  and  adding  value  through  innovative  design  and  delivery  features.

Author Anne Murphy, Barry Barnett, Nadezda Nikolova, Jason Hartell, Jerry Skees, and Richard Carpenter
Publisher GlobalAgRisk, Inc.
Number of Pages 99 pp.
Primary Language English (en)
Region / Country Global
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Establishing an Index Insurance Trigger for Crop Loss in Northern Ghana Paper 2011

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This study analyzes the relationships between rainfall per crop gestation period (planting – harvesting) and crop yields and study the likelihood of crop yield losses. It makes recommendations on how this information could be used to develop a trigger for index insurance to help mitigate the financial risks to farmers and lenders who make loans to farmers in Ghana. The focus of this paper is on rainfall and crop yield and explores the potential for a drought loss insurance index trigger. This study concludes by describing limitations and challenges that must be overcome in order to develop such risk management tools and by describing the potential for crop loss index insurance based on area crop yield in northern Ghana.

Author The Katie School of Insurance, Illinois State University
Publisher The Katie School of Insurance, Illinois State University
Number of Pages 27 pp.
Primary Language English (en)
Region / Country Global
Ghana
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The Potential for Scale and Sustainability in Weather Index Insurance Report 2010

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Depuis le début des années 2000, un nombre croissant de programmes pilotes ont testé un outil innovant en matière de gestion du risque covariant dans le secteur agricole: la microassurance indicielle.

L'assurance basée sur un indice climatique est un produit financier lié à un indice présentant une forte corrélation avec les rendements locaux. Les indemnisations sont déclenchées par des tendances spécifiques de l'indice convenues, et non par les rendements effectifs, ce qui a pour conséquence de réduire le risque d'aléa moral et d'antisélection, tout en éliminant la nécessité de procéder à des évaluations sur le terrain.

En outre, le produit d`assurance étant basé sur un indice vérifiable de façon indépendante, il peut également être réassuré, ce qui permet aux compagnies d'assurance de transférer efficacement une partie du risque aux marchés internationaux.

Author P. Hazell, J. Anderson, N. Balzer, A. Hastrup Clemmensen, U. Hess and F. Rispoli
Publisher IFAD
Rome, Italy
Number of Pages 156 pp.
Primary Language English (en)
Region / Country Global
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The Potential for Scale and Sustainability in Weather Index Insurance Report 2010

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Weather index-based insurance is a financial product linked to an index highly correlated to local yields. Indemnifications are triggered by pre-specified patterns of the index, as opposed to actual yields, reducing the occurrence of moral hazard and adverse selection and eliminating the need for in-field assessments. In addition, because the insurance product is based on an independently verifiable index, it can also be reinsured, thus allowing insurance companies to efficiently transfer part of their risk to international markets.

The Weather Risk Management Facility, a joint undertaking of IFAD and WFP, reviewed a range of recent experiences with index insurance programmes around the world, analysing the key actors, features of the products, and their successes and challenges. These pilot programmes have demonstrated the great potential of index insurance as a risk-management tool. They suggest that index insurance could not only provide an additional effective, market-mediated solution to promote agricultural development, but it could also make disaster relief more effective.

Author P. Hazell, J. Anderson, N. Balzer, A. Hastrup Clemmensen, U. Hess and F. Rispoli
Publisher IFAD
Number of Pages 153 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Islamic Business Contracts and Microfinance - A case of Mudaraba Paper 2010

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Islamic world is enormous with approximately 1.2 billion people across different countries. Poverty is rampant and widespread across Islamic world. Access to finance is very low based on their religious beliefs. This is a huge population under poverty and needs immediate and significant consideration to achieve the goal of making poverty history by 2015 as pledged in Millennium development goals.

These poor Muslim micro entrepreneurs need and demand access to financial services which do not compromise their religious beliefs of interest prohibition. Their demand can be met by designing financial products which are compatible with norms of Islamic finance which are based on prohibition of interest, avoidance from Gharar, Halal or permissible use of funds and non exploitation.

Islamic alternative to interest-based conventional loan is partnership based, trade based or lease-based credit that permits the ownership and/or use of commodities or physical assets needed for productive enterprise. Partnership based modes work on profit and loss sharing and there exists a mutual agreement between financier and micro entrepreneur for a specific business. Combination of business contracts in this category includes Mudaraba, Musharka and diminishing Musharka. Our current write up is focused only on Mudaraba.

Author Azhar Nadeem
Number of Pages 16 pp.
Primary Language English (en)
Region / Country Global, Africa, Northern Africa, Western Africa
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Microinsurance that Works for Women: Making Microinsurance Programs Gender-Sensitive Paper 2009

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This paper is intended to generate discussion of a gendered approach to microinsurance. While insurance companies are beginning to design and deliver a variety of products to the poor, the paper focuses primarily on health and life insurance because these two risks typically are reported to exert significant financial pressure on poor women.

The authors explore how health and life microinsurance could be designed to more effectively respond to women’s needs, and offer practical advice to insurance companies for delivering such schemes. They conclude with a call to action for microfinance providers and insurance companies to make insurance more gender-sensitive, which will serve the dual mission of poverty alleviation and profitability.

Author A. Banthia ; S. Johnson ; M. McCord ; B. Mathews
Publisher ILO
Number of Pages 4 pp.
Primary Language English (en)
Region / Country Global
Bolivia, Colombia, India
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The landscape of microinsurance in Africa Article 2009 English (en)

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Microinsurance is growing and expanding throughout Africa. Led by the ILO's Microinsurance Innovation Facility and the MicroInsurance Centre, this study identified over fourteen million low-income people in Africa who were covered by microinsurance at the end of 2008. The outreach almost doubled over the last 4 years. Even with such growth, there are clearly significant gaps. Substantial parts of the continent remain almost barren of microinsurance. Health, agriculture and property covers, all significantly in need by the low-income market, are evident as a mere fraction of life insurance coverage.

This study provides a detailed picture of microinsurance in Africa and discusses challenges in the years to come in order to facilitate broader, high-quality expansion.

ilo - microinsurance innovation facility  -  English (en)

Author M. Matul; M. McCord; C. Phily; J. Harms
Publisher International Labour Organisation
Number of Pages 8 pp.
Primary Language English (en)
Region / Country Global, Africa, Eastern and Central Africa, Northern Africa, Southern Africa, Western Africa
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Innovations In Insuring the Poor Paper 2009 English (en)

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This set of briefs considers how to increase the tools available to poor households to manage agricultural and health risks. The focus is how to develop insurance markets, along with other financial instruments such as credit, savings, and social protection policies. The series does not document the proven impact of insurance markets for the welfare of poor people; rather, it brings together briefs written by usinesspeople, policymakers, and researchers that document innovations, lessons learned, and areas of future work and action.

Innovations In Insuring the Poor  -  English (en)

Author Hill, R. and Torero, M.
Publisher IFPRI
Number of Pages 40 pp.
Primary Language English (en)
Region / Country Global
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Insurance against Losses from Natural Disasters in Developing Countries Paper 2009

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This paper examines the recent experience with insurance and other risk-financing instruments in developing countries in order to gain insights into their effectiveness in reducing economic insecurity. Insurance and other risk financing strategies are viewed as efforts to recover from negative income shocks through risk pooling and transfer. Specific examples of public-private insurance programs for households, business-firms, and governments are described, highlighting their limitations, especially in light of the post-Katrina experience in the United States. It examines arguments both in support of and in opposition to donor and public involvement in provision of subsidized insurance in developing countries.

Author Joanne Linnerooth-Bayer and Reinhard Mechler
Publisher DESA
Number of Pages 37 pp.
Volume / Issue# 85
Primary Language English (en)
Region / Country Global
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Islamic Microfinance: An Emerging Market Niche Technical Note 2008

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This Focus Note provides an overview of the current state of the Islamic microfinance sector and identifies possible challenges to its growth. It is intended as an introduction to Islamic microfinance primarily for the donor community and other potential entrants into the market.

Author Nimrah Karim, Michael Tarazi, and Xavier Reille
Publisher CGAP
Number of Pages 16 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Assessing Opportunities for Agricultural Insurance and Risk Coping Strategies Report 2007

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Managing agricultural risks and improving the well-being of rural populations are key components of Vietnam’s agricultural development strategy. This report includes seven chapters, four annexes, and several case studies. Chapter 1 introduces the purpose, methodology, sampling strategy, survey locations, conceptual framework that guided the research, and the economic status and strategies of surveyed households. Chapter 2 describes the agricultural risks and their impacts on farm households. Chapter 3 and 4 review the strategies that farm households use to cope with agricultural risks. Chapter 5 presents the case study of an active semi-formal livestock insurance program in North Vietnam. Chapter 6 presents preliminary conclusions about the opportunities for agricultural insurance in Vietnam and describes the results of the Product Concept Test Survey.

Author Dao Van Hung
Publisher Microfinance Opportunities
Number of Pages 80 pp.
Primary Language English (en)
Region / Country Global
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Plenary 6 - Evolving models for managing agricultural risks in India Document 2007

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During the Rural Finance Research conference, Dr Sankar Datta made a brief presentation to participants in a plenary session telling them how BASIX - a livelihood promotion and financial service provider in India - developed and introduced weather index insurance as a product for their clients.

A more detailed account of the process is provided in the attached paper written by Mr Gunaranjan.

Author Datta, S.; Gunaranjan
Primary Language English (en)
Region / Country Global
India
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Patterns of Rainfall Insurance Participation in Rural India Paper 2007

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This paper studies in detail a particular rainfall insurance product developed by the insurance firm ICICI Lombard1, which has been offered in recent years to smallholder farmers in the Andhra Pradesh region of southern India. The product provides a return based on rainfall during three separate phases of the Kharif, or monsoon season, and is inexpensive enough to be accessible to farmers of modest income (the cost for one policy covering all three phases of the Kharif is around Rs 200-300, equivalent to $5-6US). The product is sold to farmers by BASIX, a microfinance institution, and rainfall risk is underwritten by ICICI Lombard.

The paper is organised as follows:

  • Section 2 discusses the costs and benefits of index insurance.
  • Section 3 describes the contract features of rainfall insurance product, and related institutional details.
  • Section 4 discusses theoretical literature about the determinants of insurance participation and states the hypotheses to be tested.
  • Section 5 discusses the survey that was conducted and presents summary statistics.
  • Section 6 presents the empirical results on the determinants of insurance participation.
  • Section 7 concludes and discusses future research directions.

The study's ‘benchmark’ model of insurance participation hypothesised that in a simple setting without asymmetric information, a household’s willingness-to-pay for a given insurance contract will (i) increase with the household’s risk aversion, (ii) increase with the expected payout on the insurance, (iii) increase with the size of the insured risk, and (iv) decrease with basis risk (i.e. the potential mismatch between insurance payouts and actual losses which is particularly significant with index insurance).

The authors found some evidence consistent with the basis risk prediction; namely households who planted a large proportion of castor and groundnut, the two crops insured under the program were more likely to purchase insurance. They also found that take-up rates were higher amongst wealthy households, and lower amongst households who appear to be credit constrained. These findings are consistent with a simple extension of the ‘benchmark’ model to include borrowing constraints. However, they found that risk-averse households were somewhat less likely to take up rainfall insurance, not more likely as the benchmark model suggested. This result was most pronounced amongst households who were less familiar with the insurance provider, BASIX, or did not use other types of insurance.

These finding suggest that many households may be uncertain about the insurance product itself, leading risk-averse households, households with for whom evaluating new technologies is costly, and households who place less trust in the insurance provider, to avoid purchasing insurance. This finding is consistent with qualitative evidence: lack of understanding about the product was the most commonly cited explanation for not purchasing insurance, cited with 25 per cent frequency amongst non-purchasing households.

This paper, which is still a draft working document, represents a preliminary step towards documenting the features of ‘real world’ micro-insurance contracts, and understanding the barriers to increased take-up of insurance in developing countries. So far, the insurance product studied has not been entirely successful in reaching poor, constrained, vulnerable households who stand to benefit most from protection against deficient rainfall.

Author X. Gine; R. Townsend; J. Vickery
Number of Pages 55 pp.
Primary Language English (en)
Region / Country Global
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Product Design and Insurance Risk Management Document 2007

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This note states that in a low income market, insurers should ascertain the need and demand for insurance, determine the risks to be insured, and devise insurance risk management processes to ensure the product's viability.

The note provides the following tips to microinsurance providers:

  • Product design should include: defining the target group; identifying insurable risks; determining key product features; establishing payment capabilities.
  • Affordability and product design preferences should be investigated together to provide real value to clients.
  • When determining eligibility, it is essential to consider: whether a product is designed for groups or individuals; whether it should be mandatory or voluntary; the approach that must be to adopted for covering high-risk persons.
  • Payment options could be short-term, long-term or renewable. Insurers prefer short-term policies while customers would prefer long-term commitment from the insurer.
  • Microinsurance benefits should be simple and the client should be able to claim the benefit easily.
  • Coverage can be in the form of basket coverage or family coverage.
  • Long-term clients who have not claimed any benefits could get value in terms of premium-back features, paid-up insurance, savings features, etc.
  • Insurers should avoid elective participation, diverse target populations and numerous product choices.
  • The amount of claims that must be processed should be controlled.

The note concludes by discussing the advantages of waiting periods and benefit schedules in avoiding the exclusion of high-risk clients.

Author CGAP
Number of Pages 2 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Weather and Agri Risk Solutions for Emerging Markets Document 2007

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This PowerPoint presentation from Swiss Re introduces the issues relating to weather risk management in agriculture in developing countries. The author first explains the impact of adverse weather on farmers and the whole agricultural value chain. She then describes the risk transfer products that are available and the typical product range that can be considered in agriculture.

The presentation goes on to look in detail at weather risk solutions and illustrates how a parametric weather index can be established for maize production. The remaining slides provide information on specific examples in Ethiopia, Malawi and India. Swiss Re has a dedicated team and resources for business development in emerging markets, so can offer technical assistance with product set up and structuring.

Author Ulardic, C.
Publisher Swiss Re
Number of Pages 13 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Developing Indexed-Based Insurance for Agriculture in Developing Countries Brief 2007

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This note focuses on one of the most pervasive production risks, weather, which impacts all aspects of the agricultural supply chain, particularly in economies based on rain-fed agriculture. Even with the introduction of new crop varieties, production technology such as irrigation, and new management practices that offer the potential to increase yields and improve resistance to weather perils, the majority of agriculture in developing countries remains highly susceptible to extreme, uncontrollable weather events that can severely impact both quality and yield of a crop.

As early as 1999, weather index-based insurance was being discussed in academic papers as a possible solution. In 2002, donors began to finance the piloting of these ideas. In particular, the World Bank’s Commodity Risk Management Group (CRMG) was allocated trust funds from the Swiss and the Dutch governments to pilot weather insurance for farmers to complement its price risk management work in commodity markets. Since then CRMG has been involved in many weather risk management technical assistance projects to commercial entities in the developing world, including India, Ukraine, Ethiopia, Malawi, Kenya, Tanzania, Thailand and Central America. Successes like the market growth of weather index insurance in India have had significant demonstration effects and have proven that weather risk management for farmers in the developing world is possible through insurance-type instruments. The CRMG has now begun to synthesize some best practices on how to create successful weather insurance schemes for farmers and how to make such initiatives sustainable and scalable, particularly in Africa.

The note explains the principles of this form of insurance and how a measurable index that can act as a proxy for risk is created. Boxed highlights explain how the product is priced and the seven steps that are required to develop a weather insurance pilot. The authors note that even if it is technically feasible to develop index-based weather risk management products, the operational challenges of reaching end users can be insurmountable for the actual implementation of a program. Attempts to integrate risk management practices into organizations that have problems such as poor communications infrastructure, institutional instability, underdeveloped marketing and financial skills, and weak managerial and decision-making authority, are likely to be ineffective and inefficient. The success of a weather insurance pilot also critically depends on the relationship the farmer has with the institution offering the insurance. The stronger and more trusted this relationship, the easier it will be to educate farmers about new risk management products and their limitations, and to deliver these services efficiently. Engaging local regulators and assisting them in the design of general insurance contractual conditions for these new index-based products is another key component of building a successful program.

This brief provides a quick introduction to the subject of weather index insurance and makes it clear that it is not a simple task to develop and introduce such products. The authors conclude that without the development of thorough training material that can be deployed and taken up locally, and the availability of funding to strengthen National Meteorological Services and their weather observing network, future growth of the market for index-based products will be limited.

Author Bryla, E.; Sryoka, J.
Publisher UN Department of Economic and Social Affairs
Number of Pages 8 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Introducing Islamic Banks into Conventional Banking Systems Paper 2007

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The paper focuses on the process by which Islamic retail banking is implanted in traditional financial systems. Drawing from the experience of several countries which have introduced Islamic banking over a period of time, the paper delineates the main phases of the process, with the intention of underscoring the main challenges faced by supervisors and practitioners at each stage. It also discusses some of the main elements required to build a supporting financial infrastructure that conforms to Islamic principles.

The sequence of steps to introduce Islamic banks that is discussed below should not be seen as a rigid template from which countries may not deviate. Such a rigid scheme would hardly be realistic, as countries’ specific circumstances will vary substantially in practice. Instead, the goal is simply to discuss a series of stepping stones in the road to introducing Islamic banks, while simultaneously flagging some of the main issues that, sooner or later, are likely to arise as this industry develops. In this sense, the stages below should not be viewed as strictly sequential, but rather as overlapping layers of the same process.

The paper is structured as follows: Section II discusses some preliminaries with which the authorities should be familiar before introducing Islamic banks; Section III explains the different phases in the development of Islamic banking; Section IV discusses the role that the supervisory authority should play in this process; Section V explains the different elements that are needed to build a supporting Islamic financial infrastructure; finally, Section VI concludes.

Author Juan Solé
Publisher International Monenary Fund (IMF)
Number of Pages 28 pp.
Primary Language English (en)
Region / Country Global
Related Resources
What is Microinsurance? Document 2006

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This is the first in a series of short notes exploring this exciting new expansion of access to financial services. Because most low-income people in developing countries are self-employed or employed in small firms, they have not had access to insurance products that fit their needs through adequate delivery channels, premiums, coverage, premium collection, and product simplicity. Fortunately, there are a variety of new innovations that hold the promise of both reaching the poorest and being profitable.

Author McCord, M.; Roth, J.;
Number of Pages 5 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Insurance for the Poor? Paper 2006

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This study was prepared for the Financial Services and Poverty Reduction research project and was presented at the conference with the same name held at Bank headquarters in September of 2004. It first establishes the considerable welfare cost borne by the region’s poor when facing uncovered risks (which, in principle, are insurable), and offers empirical evidence that shows the clear disadvantages of the informal risk management instruments typically used by the poor. Next, the paper proposes ways to increase access to insurance for the poor in the region. Particularly relevant, among the proposed solutions, is the implementation of the partner-agent model in which formal insurance institutions are coupled with existing microfinance institutions for the delivery of their products, making the most of the comparative advantages of each sector.

While the use of microinsurance should not be looked upon as a “silver bullet” solution to all types of risks management problems, it is clear that access to this type of instrument can improve the welfare of the poor by providing access to a wider pool of potential investments and is also a cost effective instruments for coping with negative shocks.

Author Dercon, S.; Bold, T.; Calvo, C.;
Publisher Inter-American Development Bank
Number of Pages 38 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Effective Micro-Insurance Programs to Reduce Vulnerability Paper 2006

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The provision of insurance products to microfinance clients is becoming increasingly common and much has been learnt over the last ten years about how to design products to better meet the needs of clients. This paper sets out to provide an overview of some of those lessons learnt.

The paper stresses that the provision of any financial service to the poor must start with an understanding of client demand; the authors take this one step further and explain how client demand is tempered with other factors such as regulations, the operational environment and insurance supply. A product development process is outlined providing examples of how an effective product can be developed and implemented within a microfinance organisation.

The paper continues to look at some lessons learnt and some common features that are found in effective products. This is conducted both at the generic level for those features that are common across different types of products and then in more detail for each type of product (e.g. life, property, health etc).

Whilst the provision of insurance to the poor has mainly been via either mutuals/cooperatives or microfinance organisations using the “partner-agent” model; the authors argue that in fact there are a myriad of ways to provide the poor with access. The distribution chain is broken into distributor, administrator and risk carriers so that the reader can consider potential options.

The paper concludes by considering some of the issues that the industry faces as it seeks to expand beyond mainly life insurance via microfinance loans and into the provision of insurance to the mass market:

  • Why are the poor not buying?
  • Client education
  • Health insurance suppliers
  • Crop insurance suppliers
  • Transaction costs
  • Challenging the exiting models
Author Leftley, R and Mapfumo, S
Publisher Opportunity International Network
Number of Pages 47 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Index insurance for weather risk in lower income countries Document 2006

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This primer focuses on innovation in weather insurance designed to fit the special circumstances of lower-income countries where rural and agricultural financial markets are largely underdeveloped. Weather insurance is important to the long-term economic development of lower-income countries as a means of spurring rural finance and agricultural and rural development. Weather insurance can also help alleviate chronic poverty. The lack of access to weather insurance can cause rural and farm households in lower-income countries to consume their assets to survive an extreme weather event, or their assets may be destroyed, throwing these households into a cycle of poverty with no means of recovery. To be clear, the lack of weather insurance may be only one of several constraints that are slowing progress in economic development and rural financial markets in lower-income countries.

As critical as viable insurance markets are for economic stability and development in lower-income countries, creating these markets is a difficult undertaking. Looking to models from higher-income countries provides unsatisfactory answers. For example, agricultural insurance in higher-income countries is typically heavily subsidized. Lower-income countries cannot afford such heavy subsidies, particularly because a much larger percentage of the population is usually engaged in agriculture. Equally challenging, farm households in lower-income countries typically operate much smaller farm units, compounding the difficulty of providing rural financial services.

Other financial services, such as savings and loans, are also more accessible to small households in higher-income countries, allowing them to take more risk such as adopting new technologies and other activities to develop their businesses. This is the path to economic growth. Without strong financial services, countries are limited in their growth: limited formal rural financial markets can hinder development and the ability of the rural poor to climb out of poverty. Given the dominance of agriculturally dependent populations in lower-income countries and the typical pattern of a larger percentage of the poor living in rural areas, it is appropriate that national policy work toward building stronger rural financial services. This primer focuses on a new approach to weather insurance—index insurance—that can help develop and strengthen rural financial services. The intent is to provide the reader with the needed information to determine the potential viability of using index insurance for weather risk.

The document is structured as follows:

  1. Effects of weather risk in lower-income countries
  2. Importance of weather insurance for lower-income countries
  3. Traditional weather insurance for mitigating agricultural weather risks
  4. A new approach - index insurance for weather risk
  5. Role of governments and donors
  6. Preconditions for and restrictions to index insurance
  7. Feasibility study for index insurance
  8. Pilot-testing of index insurance
  9. Applications of index insurance

This primer is clearly a very valuable addition to a growing body of reference material on this subject and is highly recommended to those wishing to make informed decisions about incorporating index insurance into their activities.

Author GlobalAgRisk
Publisher USAID
Number of Pages 51 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Piloting Index-Based Livestock Insurance in Mongolia Paper 2006

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This paper describes the index-based livestock insurance program in Mongolia designed in the context of a World Bank lending operation with the Government of Mongolia. This project presents a unique opportunity to design and implement an original agriculture insurance program using a country-wide agricultural risk management model designed by the World Bank.

This lending operation, offers the World Bank, for the first time, the opportunity to design and implement a country-wide agriculture insurance program. It paves the way for the development of financially sustainable agriculture insurance programs for the poor. It supports a public-private partnership that aims (i) to offer insurance coverage that is attractive to herders, (ii) to involve the domestic insurance market while protecting it against catastrophic losses, and (iii) to limit the fiscal exposure of the government.

Author Mahul, O.; Skees, J.;
Number of Pages 4 pp.
Primary Language English (en)
Region / Country Global
Related Resources
A System of Drought Insurance for Poverty Alleviation in Rural Areas Report 2006

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This report is a feasibility study of a practical method of drought insurance that is self-sustaining and ready for use by poor farmers, NGOs or other development organisations. It begins by noting the inherent risks in agriculture, where drought in particular has a documented adverse impact on agricultural development. A long history of decision-support tools have been developed to try and help farmers or policy makers manage risk. However, it also notes that the poor have little access to risk-minimisation methods used by others. This may mean minimising investment in the main risk they confront, growing a crop, such as not applying fertiliser to it. Although risk is lessened, the potential to generate a profit is also lessened. Risk avoidance is thus inefficient and using it locks poor small-holders into poverty, argues the report.

Insurance is widely used by farmers in developed countries to protect them against weather risk. As the reprot states, in the case of drought, insurance takes the best available scientific estimate of drought probability at a site within a single number – the insurance premium. However, weather insurance has rarely been offered to poor small-holder farmers in developing countries.

A case study on weather insurance for drybean farmers in Nicaragua is firstly presented. The report then builds on this by setting out the considerations for developing rainfall insurance for these drybean farmers – this includes both technical and non-technical considerations. The following section discusses a methodology for designing a payout index based on rainfall. Usefully, a sample contract is also provided. The final sections of the report look at practical issues such as site specific probabilities of a trigger event, practical issues of distributing insurance, and the outcomes of consultation with farmers.

Author Nieto, JD, Cook, S, Lundy, M, Fisher, M, Sanchez, D, Guevara, E
Publisher CIAT, BMZ, GTZ, CRS
Number of Pages 94 pp.
Primary Language English (en)
Region / Country Global
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Mitigating Weather Risk Paper 2006

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The livelihoods of many rural poor in low income countries remain predominantly dependent on agricultural activity, and agriculture activity is vulnerable to a wide range of risks, including those related to weather. Without mechanisms to protect themselves against risk, these rural households and enterprises are often unable or unwilling to take advantage of market opportunities. Instead, they follow low-risk/low-return livelihood strategies and may even retreat from profitable projects for which they have adequate liquidity, resulting in lower than necessary incomes and growth. Insurance, flexible savings and other financial services that help households to smooth consumption and protect themselves against shocks can help minimize potentially devastating asset losses and facilitate shifts toward adoption of livelihood strategies with potentially higher returns. In addition, instruments that mitigate risk to these households also remove a primary constraint to the supply of finance as private sector financial institutions are better able to reduce a major cause of default on loans in rural areas and to agricultural enterprises. Improved access to finance further reduces rural households’ and agricultural enterprises’ vulnerability by enabling them to improve technologies, expand assets, and take advantage of economic opportunities.

This note explores the relationship between agricultural sector development, weather risk and finance, and examines an insurance innovation that is designed to mitigate some of the risk that rural households and agricultural enterprises experience as a result of extreme weather events. It also examines the potential impact of such an insurance product on financial institutions with significant agricultural loan portfolios.

The note’s conclusion includes a set of general factors that donors and governments should consider to stimulate the development and practical applications of index-based insurance in developing countries:

  1. Identifying/creating relevant data set
  2. Ensuring secure data collection
  3. Educating rural people and institutions about the value and use of weather insurance
  4. Legal and regulatory framework
  5. Underwriting
Author Jepsen, J
Publisher USAID
Number of Pages 6 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Good and Bad Practices in Microinsurance: VimoSEWA Case Study Paper 2005

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The Self-Employed Women’s Association (SEWA), a trade union for female informal sector workers, was registered at Ahmedabad, India in 1972. SEWA’s, main goals are to organise women workers for full employment, so they can obtain income, food and social security. In Gujarati, Vimo means insurance. This case study focuses on the evolution of VimoSEWA since the development of its business plan, which aimed to establish a viable microinsurance scheme. The business plan itself followed the liberalisation of the Indian insurance market in the late 1990s and the Gujarat Earthquake in January 2001.

VimoSEWA provides a voluntary, integrated insurance product, which is the most challenging type of microinsurance. It is open to all members whether or not they have a loan, and provides life, accident, health and asset protection to a group that has higher risk and lower incomes that the “normal” insurance market. Managing a smaller operating margin with higher claims costs provides a significant challenge.

By January 2005, membership was below target and viability remained 7 years away, with low renewal rates as the principal cause. The paper suggests, however, that there have been some important evolutions of understanding within VimoSEWA:

  • There is now a clear concept of the risk of insurance and the requirement to protect the scheme from major catastrophic events;
  • Developing a management information system is a necessary element to manage the microinsurance scheme actively;
  • VimoSEWA’s management team now has the skills, vision and knowledge to reach the goal of viability;
  • The business plan was an important tool to set critical benchmarks; periodic review of goals permitted VimoSEWA to make adjustments to methods and procedures;
  • Management and staff teams used reports to actively manage the organisation;
  • Developing capacity of each staff person was difficult as microinsurance is new and no clear solutions have been developed;
  • The assistance of an outside actuarial and management consultant helped the team to recognise problems, and to realise that solutions had to come from within the organisation;
  • Product development must always consider the ability of members to pay for benefits;
  • Obtaining a high renewal rate may be difficult, as the widely dispersed membership requires an understanding of insurance and solidarity, facilities to pay premiums, access to health care providers, and methods to obtain reimbursements;
  • Adequate accreditation standards for health facilities covering appropriate treatment protocols, as well as health education programmes aimed at the target population, are necessary to keep health claims costs from spiralling out of control.

The paper concludes by highlighting that developing integrated insurance schemes takes time, dedication and a highly effective organisation. It also suggests that if VimoSEWA can succees, its model may be a base for other community-based insurance schemes.

Author Garand, D
Publisher CGAP Working Group on Microinsurance
Number of Pages 157 pp.
Primary Language English (en)
Region / Country Global
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Insurance of Crops in Developing Countries Book 2005

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Agricultural insurance, although one of the most often quoted tools for risk management, can only play a limited role in managing the risks related with farming. The applicability of insurance in any given situation is based on consideration of whether it is a cost-effective means of addressing a given risk. The paper highlights, however, that agricultural insurance is nevertheless a growing business driven by increasing commercialisation of agriculture, international trade, and foreign direct investment, and the development of new insurance products.

This publication is intended to be a supplement to the FAO Agricultural Services Bulletin 86 “Strategies for Crop Insurance Planning” and in particular to provide insight into some of the more recent developments in terms of new insurance products and programmes. The bulletin argues that despite the limited experience with some of these products, they will create an opportunity to offer practical solutions to many of the barriers to classic crop insurance for small-scale, dispersed farmers in less developed areas of the world.

The purpose of this book is to provide an introductory overview of crop and forestry insurance. In doing so it opens by defining the boundaries for these types of insurance products. The setting of boundaries is very deliberate. It is intended to assist those interested in exploring and exploiting this financial mechanism to do so in a realistic and satisfactory manner.

Secondly, this booklet sets out how to proceed with planning for crop insurance, within the established boundaries.

While some of the example material is taken from developed agriculture and forestry, the basic target group of readers is expected to be those concerned with crop and forest risk management in developing parts of the world. As such, the booklet is largely targeted at:

  • Farmer unions, officials and members;
  • Producer/commodity groups;
  • Processors, marketing firms and others contracting with farmer producers;
  • Officials of Ministries of Agriculture, Planning, Commerce and Health;
  • Bankers with farming and forestry clients;
  • Insurers with farming and forestry clients
Author Roberts, R
Publisher Food and Agriculture Organization of the United Nations (FAO)
Primary Language English (en)
Region / Country Global
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Livestock and Aquaculture Insurance in Developing Countries Book 2005

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The publication is a brief introduction to the role of insurance as a risk management mechanism in livestock and aquaculture enterprises. As such, it also intends to contribute to redressing the current imbalance in development efforts between crop insurance and livestock/aquaculture insurance. With the focus of the book being on enterprises in developing countries, most attention is given to livestock kept for food and/or fibre, and transport/motive power. It does not purport to be a guide on to how to design an insurance product for these types of farming. Rather it aims at setting the scene, and exploring with the reader some of the complexities involved in this financial mechanism for risk sharing.

It starts by stressing the importance of risk management practices other than insurance, including policy issues e.g. site licensing, regulations relating to such matters as quarantine and compulsory veterinary procedures as well as on-farm physical measures such as attention to structural maintenance of fences, cages, racks and housing, daily monitoring for disease conditions, and both preventive and curative veterinary procedures.

In order to further identify the potential role for insurance, the publication briefly describes financially-based mechanisms such as share-farming, farming partnerships and Islamic-type borrowing where the lender shares the potential profit and the potential loss as well as the forward sale of output and other types of contractual farming arrangements.

It then covers the more usual areas of insurance, such as: the roles of public and private sectors; the overall design of policies, including the basis for valuation; marketing policies; methods of collecting premiums and paying indemnities; loss adjustment; insurance product monitoring and modification.

While some of the example material is taken from developed country livestock and aquaculture experience, the basic target group of readers is expected to be those concerned with these enterprises in developing parts of the world.

Author Roberts, R.A.J.
Publisher Food and Agriculture Organization of the United Nations (FAO)
Number of Pages 81 pp.
Primary Language English (en)
Region / Country Global
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Managing Agricultural Production Risk – Innovations in Developing Countries Paper 2005

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In developed countries formal global markets are widely used for offsetting natural disaster and weather risks. This document aims to demonstrate how these markets can be used to insure these risks in developing countries. It stresses the key challenge remains of how to make insurance against extreme weather events both more effective and affordable. Two major issues are seen to obstruct the development of risk transfer markets for agricultural losses caused by such events:

  1. Organising ex ante financing for highly correlated losses that result in extremely large financial exposure; and
  2. High transaction costs due to asymmetric information problems such as moral hazard and adverse selection.

This document has been written to inform a broad range of decision makers about progress being made in risk transfer for natural disaster risk with a focus on defining practical roles for governments of developing countries and the World Bank in developing risk management strategies.

The document begins with an overview of risk and how decision makers currently cope with and manage risk in developing countries and examines the impediments to developing effective risk transfer markets. A review of the experience of some developed countries then follows. Consideration is also given to alternative solutions that might be possible by introducing the concept of weather index insurance and the advantages of such systems for developing countries. Two basic innovations dominate the conceptual framework behind this proposal:

  1. Use of index-based insurance; and
  2. Layering risk to facilitate risk transfer.

Several case studies and a number of pilot programs are also provided to illustrate how these concepts are being applied in countries around the world. Finally, the paper concludes with recommendations for the role of the World Bank and country governments in facilitating the development of innovation in agricultural risk management.

Author World Bank – Agricultural and Rural Development Department
Publisher The World Bank
Number of Pages 86 pp.
Primary Language English (en)
Region / Country Global
Related Resources
New ways for rural finance? Livestock insurance schemes in Vietnam Paper 2004

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In developing countries, insurance markets are usually underdeveloped. Nevertheless, if the development path is supported by strong structures and institutions, anonymous markets will over time replace informal insurance net-works as they are more efficient. In Vietnam, livestock is an important household income source and has additional non-economic functions in the households. Rural financial institutions in Vietnam financed for a long time only a small array of agricultural investments, but frequently including livestock purchase. The absence of off-farm investment possibilities further encouraged investment into livestock production. Livestock death is, therefore, considered to be a main factor contributing to poverty.

Farmers using credit to purchase livestock face two risks at once: (1) losing the livestock due to disease and subsequently (2) failure of the investment. Farmers would like to reduce the uncertainty. Nevertheless, a formal agricultural insurance market hardly exists in Vietnam and farm households have to rely mainly on informal mutual aid schemes.

The objective of this paper is to contribute to the discussion on the general feasibility of a livestock insurance scheme (LIS) in Vietnam. In this context the supply of LIS is discussed. Qualitative data collection took place mainly between 2003 and 2004. Four different types of insurance providers were selected for analyzing the supply side:

  1. Insurance tied to credit within a state owned company,
  2. Insurance tied to credit within a development project,
  3. A state owned insurance company,
  4. A private insurance company.

By selection of these different insurance providers the variety of livestock insurances offered in Vietnam was covered. The main conclusion is that there is no insurer in Vietnam offering an area-wide, sustainable animal insurance scheme. Offering sustainable livestock insurance is mostly hampered by unreliable data on livestock mortality and by politically low set premiums.

Author Dufhues, T.; Lemke, U.; Fischer, I.
Publisher University of Hohenheim
Number of Pages 10 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Making Insurance Work for Microinsurance Institutions Case Study 2003 English (en)

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This how-to manual guides managers of microfinance institutions (MFIs) through the complexities of offering basic insurance products, either on their own or in partnership with an insurance company. Insurance is one solution to help low-income households and microfinance institutions to manage risks, but it is not the only solution and it is not always the best solution. Written for senior managers and directors of MFIs that offer insurance or are planning to do so, this manual helps readers to determine whether it is appropriate to offer insurance, which type of insurance product(s) to offer, and through what institutional structure.

This bulk of this manual is dedicated to four aspects:

  1. The fundamentals of the insurance business, including benefit design, insurance terms, pricing and controls;
  2. The design of five basic, short-term, credit-linked insurance policies, both mandatory and voluntary;
  3. Outsourcing part or most of the insurance responsibilities to a formal insurance company or to skilled consultants;
  4. The financial management and operational integration of an insurance business into a microfinance institution.

While low-income households have many needs and vulnerabilities, the contents of this manual are limited to basic life and disability products because they respond to an important need while being less difficult for MFIs to offer. The insurance business is highly complex and carries significant risk, thus basic life insurance is a good starting point for an MFI.

This manual is also relevant, however, to organisations that want to offer other types of insurance, such as health or property, because it provides a strong introduction to insurance fundamentals and offers valuable advice on how to design, negotiate and manage a relationship with an insurance partner. While it may be possible for an MFI to offer basic insurance on its own, or with some technical support from insurance experts, more complex products should be offered in partnership with an insurer.

Document  -  English (en)

Author Churchill, C.F.; Liber, D.; Mc Cord, M.J.; Roth, J.
Publisher BIT (Bureau International du Travail)
Number of Pages 252 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Making Insurance Work for Microfinance Institutions Study Guide 2003

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This how-to manual guides managers of microfinance institutions (MFIs) through the complexities of offering basic insurance products, either on their own or in partnership with an insurance company. Insurance is one solution to help low-income households and microfinance institutions to manage risks, but it is not the only solution and it is not always the best solution. Written for senior managers and directors of MFIs that offer insurance or are planning to do so, this manual helps readers to determine whether it is appropriate to offer insurance, which type of insurance product(s) to offer, and through what institutional structure.

The main part of this guide focuses on four key aspects:

  1. The fundamentals of the insurance business, including benefit design, insurance terms, pricing and controls;
  2. The design of five basic, short-term, credit-linked insurance policies, both mandatory and voluntary;
  3. Outsourcing part or most of the insurance responsibilities to a formal insurance company or to skilled consultants;
  4. The financial management and operational integration of an insurance business into a microfinance institution.

While low-income households have many needs and vulnerabilities, the contents of this manual are limited to basic life and disability products because they respond to an important need while being less difficult for MFIs to offer. The insurance business is highly complex and carries significant risk, thus basic life insurance is a good starting point for an MFI.

The guide is also relevant, however, to organisations that want to offer other types of insurance, such as health or property, because it provides a strong introduction to insurance fundamentals and offers valuable advice on how to design, negotiate and manage a relationship with an insurance partner. While it may be possible for an MFI to offer basic insurance on its own, or with some technical support from insurance experts, more complex products should be offered in partnership with an insurer.

The guide is based on the findings of several ILO microinsurance studies, funded by the Dutch government, which were done in South Africa, Burkina Faso, Zambia, the Philippines and India. It is beautifully produced with many examples and checklists to facilitate both self study and incorporation into training courses. In fact the ILO offer a training course at the Turin Training Centre that is based on this material.

The English version may be downloaded as a single document from the ILO website (see below) but as it is a very big file, it has been provided here divided into its respective chapters.

Author C. Churchill; D. Liber; M.McCord; J. Roth
Publisher ILO; ADA
Primary Language English (en)
Region / Country Global
Related Resources
Examining the feasibility of livestock insurance in Mongolia Paper 2002

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This study examines the feasibility of offering insurance to compensate for animal deaths in Mongolia, given the unique role livestock plays in Mongolian culture and economy. This study focuses on the potential for using the livestock mortality rate at a local level (e.g., the sum or rural district) as the basis for indemnifying herders. In order to do this, the study examines three alternatives to insure livestock deaths in Mongolia:

  1. traditional livestock insurance that pays individual herders based on their specific losses;
  2. weather insurance that would pay when weather events that are likely to create serious losses occur; and
  3. index insurance that would pay when livestock mortality rates exceed certain thresholds by sum.

 

The study recommends that the insurance that is used in Mongolia should not interfere with the exceptional efforts that experienced herders take to save animals during sever weather. Using an individual insurance may diminish these efforts. Since index insurance would pay all herders in the same region at the same rate, the incentives for management to mitigate livestock losses remain strong. No-one would reduce their effort to collect on insurance. Those who increase their efforts during a major event would likely be compensated for this effort even though they do not lose livestock. In some cases, they could reasonable expect to receive payments that would compensate for the added effort or the added cost of trying to save their livestock.

The paper suggests a pilot test of the mortality insurance concept and provides the basic considerations and steps to follow for its implementation.

Author Skees, J.; Enkh-Amgalan, A.
Publisher World Bank Group
Number of Pages 41 pp.
Primary Language English (en)
Region / Country Global
Mongolia
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Weather Risk Management for Agriculture and Agri-Business in Developing Countries Book Chapter 2002

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This chapter has three components. The first part argues that weather risk causes substantial inefficiencies in developing countries; agri-businesses, faced with underdeveloped formal financial markets, have to rely on traditional weather risk management (WRM) that is associated with under-investment and over-diversification. The authors discuss how new WRM can overcome the pitfalls of traditional WRM and have a large development impact. They argue that successful weather risk-sharing arrangements in developing countries would offer potentially huge benefits not just to farmers, but also to agri-business and financial markets. With the advent of effective WRM, finance institutions would be able to collateralise rural credit more efficiently and extend loans to groups of weather-exposed farmers that otherwise would not be bankable.

In the second section, the authors look at the key success factors of new WRM in emerging markets. Five factors are highlighted:

  • Good weather data in key locations
  • The financial intermediaries and their clients
  • Facilitation by development organisations
  • A benign regulatory framework
  • Risk transfer mechanisms into international weather markets

The final part turns to the operational aspects of a new WRM, studying in detail the case of rainfall index insurance for cereals in Morocco. Ultimately, the authors conclude, the emergence of a vibrant weather market will be driven by knowledge transfers to local “champions” who grasp the opportunity, as well as the demonstration effects of a few emerging market transactions and the willingness of global weather risk market makers to shoulder some up-front costs in order to reap the benefits of a globally diversified weather market.

Author Hess, U.; Richter, K.; Stoppa, A.
Publisher Risk Books
Number of Pages 16 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Developing rainfall-based index insurance in Morocco Paper 2001

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A rainfall-indexed insurance product is practical, where the statistical correlation between rainfall and cereal revenues is rather strong in the more favourable agro-climatic zones. Proportional rainfall insurance contracts would pay the insured an amount based on the shortfall in actual rainfall during a set period compared with the trigger rainfall. The contracts could be purchased in any amount, allowing farmers to insure the full amount of their expected revenue if they wish.

This paper assesses the feasibility of developing rainfall-based index insurance in Morocco as a means of providing effective and low-cost drought insurance to farmers and rural people. The paper specifically examines:

  • Features of Moroccan Agriculture and weather-related risks
  • Current Moroccan Drought Insurance Scheme
  • Analysis of the Feasibility of Rainfall Contracts

 

The benefits of this program over the traditional insurance scheme used in Morocco are that it minimizes the risk of moral hazard and adverse selection and promotes a streamlined pay-out process. These features make the program more attractive to international re-insurers and investors in capital markets.

Author Skees, J.; Gober, S.; Varangis, P.; Lester,R.; Kalavakonda, V.
Publisher The World Bank
Number of Pages 39 pp.
Primary Language English (en)
Region / Country Global
Morocco
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Insurance as a Microfinance Product Brief 2001

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There is an attractive development logic for the provision of insurance to low-income households. One can easily create a compelling story of how a microinsurance product will protect the poor against devastating losses or smooth the volatile cash flow of low-income households, while generating increased profits for the microfinance institution (MFI). Today’s microfinance industry abounds with such stories, and dozens of MFIs are rolling out microinsurance products in a rush to meet both client and institutional needs.

While there is no doubt that low income households are highly vulnerable to risks—nor that MFIs are in need of increased profits—microinsurance is only a partial response. It is also a response that most MFIs will find difficult to implement, because they have not yet had cause to create the specialized skills and institutional structures that commercial insurers have developed over decades, in order to underwrite risks prudently.

This brief describes the parameters of microinsurance in the range of risk management products and tools typically used by microfinance clients. Additionally, it describes the main types of insurance being offered by MFIs today, and highlights the resources MFIs require to manage insurance premiums and products profitably. It concludes with a suggested approach to microinsurance that is built on partnerships between MFIs and licensed insurers.

This is a very helpful brief that explains clearly the implications of introducing insurance products as a microfinance service. It is based on a conference presentation by Craig Churchill, Calmeadow, at the February 2000 conference on "Advancing Microfinance in Rural West Africa" in Mali.

Author Miller, M.; Northrip, Z.
Publisher USAID Microenterprise Best Practices Project
Primary Language English (en)
Region / Country Global
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Providing insurance to low-income households: Part 1: a primer on insurance principles and products Paper 1999

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This paper has been written primarily for managers and directors of microfinance institutions that either offer insurance or plan to develop an insurance product for low-income households. It suggests that the provision of insurance might create a win-win situation where clients experience a reduction in vulnerability to risk and MFIs benefit from an improved bottom line. Key points are:

  • insurance is a promising response to risks which cause losses that are beyond the means of the poorest and pools the risks faced by low-income households,
  • in the drive for sustainability or profitability, MFIs are diversifying their lines of financial products and insurance has the potential to improve profitability by reducing loan losses and replacing clients' need to draw down savings for emergencies,
  • MFIs can benefit from an additional source of capital for lending or fee-based income as agents.

 

The paper is divided into three main sections:

  1. The first chapter examines risks faced by low-income households, e.g., life cycle needs, death, property, health,disability and mas, covariant risks. A framework is developed which classifies the risks on the basis of degree of uncertainty and relative size of loss.
  2. The second chapter reviews potential risk management strategies, including informal individual and group based coping strategies and formal credit, savings and insurance products.
  3. The third chapter looks at insurance from the provider's perspective, including matching supply and demand and the different types of insurance products.

The paper concludes that insurance involves pooling risk over a number of participant groups and is not like a savings product. Insurance may be secondary to saving enough money to protect from economic shocks and is most appropriate for uncertain and expensive losses. Developing insurance products should involve experts.

Author Brown, W.; Churchill, C.
Publisher Microenterprise Best Practices Project
Number of Pages 91 pp.
Primary Language English (en)
Region / Country Global
Related Resources
New Approaches to Crop Yield Insurance in Developing Countries Paper 1999

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This paper begins by noting that the same factors that make agricultural production a risky business for farmers (such as a variety of weather, pest, disease, input supply and market related risks), are also of concern to agricultural lending institutions. The paper also suggests that traditional risk management mechanisms, although widely recognised, have their limitations. They can be costly in terms the income opportunities that farmers forego (e.g. crop diversification is typically less profitable than specialisation). They can discourage investments and technological changes that, while risky, enhance long-term productivity growth. Furthermore, the paper points out that they have limited capacity to spread covariate risks like droughts that affect most farmers in a region at the same time.

It is noted that society can gain from more efficient sharing of crop and natural disaster risks. The paper explores government intervention in agricultural risk markets and discusses new approaches to risk sharing with limited government involvement. In particular, the authors build the case for introducing negotiable state-contingent contracts settled on area crop yield estimates or locally appropriate weather indices. These instruments, they argue, could replace traditional insurance at a lower cost to government while meeting the risk management needs of a wider clientele.

Following the introduction the paper begins by setting out the experience with public crop insurance – discussing the programs, results and in particular the reasons for failure. It then moves onto new approaches to insurance: using index and area-based contracts to insure natural disaster. This section ends with a look at finding efficient and affordable mechanisms to share covariate risk. The paper then concludes with the view that a market-based, risk sharing alternative for agriculture has many advantages, however, does also note the issues that remain to be addressed.

Author Skees, J, Hazell, P and Miranda, M
Publisher International Food Policy Research Institute
Number of Pages 40 pp.
Primary Language English (en)
Region / Country Global
Related Resources
Glossary of terms for agricultural insurance and rural finance Book 1992

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This glossary was produced by FAO in 1992 with the intention of facilitating dialogue and comparisons between countries on these two subject areas. It provides a wide range of definitions, divided into two sections:

  1. agricultural insurance and
  2. rural finance

It is a useful reference tool for researchers, teachers and practitioners in the field of rural finance.

 

The French and Spanish versions are currently only available in hard copy and can be ordered from FAO.

Author FAO
Publisher Food and Agriculture Organization of the United Nations (FAO)
Number of Pages 155 pp.
Primary Language English (en)
Region / Country Global
Related Resources
The Microinsurance Network Website English (en)

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The Microinsurance Network promotes the development and delivery of effective insurance services for low-income people by encouraging shared learning, facilitating knowledge generation and dissemination, and providing a global multi-stakeholder platform.

Low-income populations are more vulnerable to risk because of their lack of financial means to absorb negative shocks to income or assets. As such, there is a need to encourage risk management solutions tailored to the low-income market.

The Microinusrance Network's focus is to bring together experts and key stakeholders of the sector to exchange and share ideas and distill key insights and lessons learned. Ultimately, we strive to accelerate the adoption of best practices and the reaching of scale of quality microinsurance products and services across the globe.

microinsurancenetwork.org  -  English (en)

Primary Language English (en)
Region / Country Global
Related Resources
Micro-insurance landscaping in Africa 2012 - Data Visualization Document English (en)

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This interactive map presents up-to-date data on microinsurance providers, products, distribution channels, and market trends for 39 African countries.

The map is based on the Landscape of Microinsurance in Africa 2012 study, published by Making Finance Work for Africa and the Munich Re Foundation.

The study, officially launched at the 8th International Microinsurance Conference in Dar es Salaam, on November 8, 2012, describes recent trends in microinsurance on the continent, and indentifies gaps in access to microinsurance and key bottlenecks to the development of a viable and sustainable microinsurance sector in Africa.

The most striking finding is that microinsurance coverage in Africa has grown tremendously over the past few years. The prior 2010 study identified a total of 14.7 million lives and properties covered by microinsurance in 32 countries. The current study identified 44.4 million lives and properties covered in 39 countries, a growth of over 300% between 2008 and 2011.

Although microinsurance coverage has dramatically increased, the market described in 2008 has not significantly changed: the vast majority of Africans who have insurance coverage are covered by life insurance. Insurance products related to agriculture and health are not as common on the continent, which is inconsistent with strong prevailing demand.

Micro-insurance landscaping in Africa 2012 - Data Visualization  -  English (en)

Author Making Finance Work for Africa (MFW4A), Munich Re Foundation
Primary Language English (en)
Region / Country Global
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