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Disaster Risk Preparedness and NatCat Microinsurance: A Profitable Business?
Dr. Antonis Malagardis, GIZ RFPI
15th Conference on Catastrophe Insurance in Asia
20-21 September 2017, Shangri-La‘s Far Eastern Plaza Hotel,
Taipei, Taiwan
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Outline
1. Insurance in the Risk Continuum
2. G7 InsuResilience – Direct and Indirect Insurance schemes
3. Microinsurance development in selected countries in Asia
4. APEC Microinsurance Roadmap (including DRM & DRI)
5. Demand of MSMEs for NatCat insurance
6. Disaster Risk Management and Insurance Manual (DRIM):
An integrated approach for public and private decision makers
Recommendations
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Insurance in the Risk Continuum
Prevention and Risk Avoidance
(“Adaptation measures”)
Risk Retention Risk Transfer
e.g. Insurance
Additional Measures
NAP & Adaptation Policies
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Map: Munich Re 2013
G7 InsuResilience approach
Goal: Additional 400 Mio. poor and vulnerable people are insured against NatCat by 2020
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InsuResilience supports indirect climate risk insurance schemes
African Risk Capacity (ARC)
• Drought insurance for members of the AU in combination with early warning systems and contingency planning
• Currently expanding to new countries • New insurance products to cover
floods and tropical cyclones under development
Pacific Catastrophe Risk
Insurance Facility (PCRAFI)
• Insurance scheme covering tropical cyclones and earthquakes in Pacific Island Countries (PICs)
• Founded by G7 partners GER, JAP, UK and USA together with World Bank and PICs
Africa Pacific Caribbean and Central American
Catastrophe Risk Insurance Facility (CCRIF)
• Insurance scheme covering tropical
cyclones and earthquakes in Caribbean small island states
• Currently expanding to Central America • New insurance products to cover
excess rainfall and cyclones under development
Carri-bean
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Direct catastrophic insurance coverage combined with conditional cash transfer systems for people living in rural areas
Develop scalable weather risk insurance by using Indian MFIs and/or brokers as a distribution channel
Scaling weather index-based insurance within a contract farming business model for people working in agriculture
Development of direct climate risk insurance solutions based on satellite-based technology for selected Asian countries
InsuResilience Pilot schemes for direct climate risk insurance
Sambia
Indien
Paraguay
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Progress of Microinsurance in selected countries in Asia
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Developing multi-stakeholder partnership for financing climate risk protection Dr. Antonis Malagardis, GIZ Inter-ministerial technical workshop on valuation of climate change impacts in Vietnam 6-7 June 2017 Ha Noi
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Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com
Microinsurance works as an effective response to ex-post natcat event
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16 Mio people affected
6,300 recorded casualties
4.1 Mio people
displaced
Calamity claims: 98% of
total pay-outs
Average claims pay-out USD108
Claims rejection
rate 4.4%
13.7% of casualties had Microinsurance
111,000 claims, USD12
Mio payouts
Source: Study of effectiveness of microinsurance service providers’ response to Typhoon Haiyan in the Philippines’, commissioned by GIZ-RFPI Asia and Microinsurance Network, 2014
Response after Typhoon Haiyan in Philippines
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APEC Microinsurance Roadmap (MIR) (including DRM & NatCat Insurance)
Market drivers, market potential, market players
Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com
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Microinsurance in APEC Emerging Economies MI Regula*ons
MI coverage ra*o 15%, 11.3M lives
MI coverage ra*o 12%, 3.5M lives
MI coverage ra*o 7%, 1.2M lives
MI coverage ra*o to country popula*on (2012 &2013) Large aggregator (MNOs)
MI coverage ra*o 0.88%, 11.9M lives
MI coverage ra*o 3.8% ,1.1M lives
MI coverage ra*o 14%, 9.3M lives
MI coverage ra*o 0.56% ,1.3M lives
MI coverage ra*o 0.18% ,0.15M lives
MI coverage ra*o 29%, 29.3M lives
*Market Drivers*
Source: GIZ RFPI Asia
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103M
7M
31M
263M
1.3B 23M
68M
95M
130M
32M
18M
13%
3%
39%
3%
8%
3%
2%
0.04%
0.28%
25%
11%
17%
12%
52%
23%
# popula6on (2017)
Poverty headcount ra6o, $1.9/day, WB
Poverty line, UNDP Financial Inclusion strategy
Microinsurance in APEC Emerging Economies *Market Potential*
Source: GIZ RFPI Asia
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*Market Players*
Source: GIZ RFPI Asia
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Why to focus on disaster risk insurance for MSMEs
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SMEs Significantly Contribute to the Global Economy
Source: APEC Policy Support Unit, Policy Brief No 8, 3 Dec 2013
Micro
61% 99% 91%
Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com
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Companies have very different concerns depending on their size and maturity
Source: from presentation of Nick Smith, Global Head of SME, AXA in the UNEP-PSI and ILO webinar series
Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com
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‘At AXA we are putting our customers at the centre of our SME proposition’
Becoming more aligned with SME business interests Source: from presentation of Nick Smith, Global Head of SME, AXA in the UNEP-PSI and ILO webinar series Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com
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MSMEs demand for NatCat insurance
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Rank
ing
1 • Natural Disasters (flood, heavy rain, drought, earthquake)
2 • Fire (affecting building or assets) 3 • Illness (of owner, employees or their family)
• Theft 4 • Loss of potential income due to several reasons
(supplier did not deliver raw materials on time, reservations and bookings got cancelled, etc.)
5 • Accidents causing injury or disability
Business continuity is threatened by financial risk events Top 5 financial risks of MSMEs in the Philippines
Source: Report Insurance Needs Assessment for MSMEs in the Philippines, GIZ, November 2014
Findings…
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0
2
4
6
8
10
12
Reduce Expenses Support from social environment
Loan from Banking Institutions
Increase of working hours
Insurance Savings
Num
ber o
f res
pond
ents
Insurance tops the list of coping mechanisms of MSMEs to ensure business continuity
Source: Report Insurance Needs Assessment for MSMEs in the Philippines, GIZ, November 2014
Findings…
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Insurance tops the list of contingency plans of MSMEs to ensure business continuity
6/18/17
0 2 4 6 8 10 12 14 16 18
Gov't (DA) tie-up to increase volume supplies
Storing lumber in three different locations
Re-staffing
Other investments
Alternative Marketing
Engage in other line of business
Frequent evaluation of short-term plans
No contingency plan
Change of business location
Installment of security measures
Savings
Insurance
Number of respondents
Source: Report Insurance Needs Assessment for MSMEs in the Philippines, GIZ, November 2014
Findings…
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MSMEs spoke of most relevant insurance products which would manage the threat of business continuity
6/18/17
• Health, Hospitalization • Life, Memorial • Personal accident
Life
• Fire • Theft • Natural catastrophes
Property
• Performance bonds • Loss of income • Cancellation of order/booking
Liability
Source: Report Insurance Needs Assessment for MSMEs in the Philippines, GIZ, November 2014
Findings…
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Source: GIZ RFPI Asia
A complex natcat environment needs a comprehensive approach in identifying DRF options for SMEs
Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia) www.inclusiveinsuranceasia.com
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Recommendations
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• Awareness on DRM and DRI specifics (GIZ RFPI 2-3 days Training for public and private sector decision makers)
• Implementation of the Manual for a DRM/DRI integrated approach for MSMEs in selected APEC countries (through GIZ RFPI)
• Coordination of data gathering and data management on NatCat events between public and private sector agencies (synergies among CAT Modelers)
• Creation of the legal basis for the provision of DRI insurance coverage for MSMEs (through MEFIN network)
• Creation of mechanisms of public-private dialogue in developing products to respond to DRM/DRI (Multilateral stakeholders dialogue through MEFIN Network)
• MEFIN Network membership and advisory support
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Get in touch with us:
Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (GIZ RFPI) is a regional program funded by BMZ that supports Asian insurance supervisory authorities to enhance the enabling conditions for pro-poor insurance. Regional and global exchanges between insurance supervisors are being promoted through training and dialogue events. www.inclusiveinsuranceasia.com
Mutual Exchange Forum on Inclusive Insurance (MEFIN) is a Network of insurance regulatory authorities in Asia working for a peer-to-peer exchange of knowledge and experiences with the insurance industry. The Network implement programs that provide mutual benefit to the members in advancing inclusive insurance solutions especially targeted for the low income and the informal sectors. www.mefin.org Secretariat InsuResilience [email protected]
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Thank you!