MiRT Forum Achieving Scalable and Sustainable Catastrophe Microreinsurance

Transcription

1 April 10, 2010 MiRT Forum Achieving Scalable and Sustainable Catastrophe Microreinsurance James Nash, CEO, Asia-Pacific

2 Agenda Why are we here? Microreinsurance Today Catastrophe Microreinsurance GC Micro Risk Solutions Global Microreinsurance Facility (GMF) 1

3 GC Micro Risk Solutions Origins November, 2008: awarded Innovation Grant Grant awarded by the Microinsurance Innovation Facility Supports creation of Global Microreinsurance Facility (GMF) Primary focus in Latin America, though applicable globally January, 2009: beginning of 18-month grant term; five distinct phases: Data accrual -> Data analysis -> Facility design -> Capacity generation -> Facility implementation February, 2009: established Micro Risk Solutions group, responsible for development and management of: Microreinsurance business worldwide GMF and related intellectual capital (e.g. Microfinance industry network) Commercial (re)insurance market capacity 2

4 Microinsurance Today Benefits & Barriers Benefits Profitability Blue Ocean opportunity Emerging markets growth Improved brand equity/recognition Improved international relations/regulations Diversification/Spread of risk Significant learning Corporate social responsibility Barriers High volume, low margin business Balance profit alongside social returns Balance coverage, price and expense Lack of trust in insurers/culture of insurance Lack of MIS and enabling infrastructure Risk of adverse selection/moral hazard Lack of historical and current data Lack of enabling regulatory environment Lack of awareness/understanding/expertise Lack of capacity and risk transfer solutions Source: International Labour Organization, Protecting the poor: A Microinsurance Compendium,

5 Microreinsurance Today

6 Microreinsurance Benefits Microreinsurance and related services can knock down barriers to microinsurance market entry, sustainability and growth Increase available underwriting capacity Enable portfolio expansion Geographically By product line Enable product innovation Improve depth and breadth of coverage Make products more attendant to the needs of the poor Allow for protection of covariant exposures Improve access to expertise Improve portfolio stability and diminish results uncertainty Improve product pricing Improve access to data, analytics and information technology 5

7 Microreinsurance Market Current Events Leading global Reinsurer SCOR invests in LeapFrog Innovative non-life microinsurance launched in Indonesia Swiss Re, Oxfam America, Rockefeller Foundation and Columbia s IRI expand joint risk initiative in Ethiopia Janashakthi joins global giants to develop microinsurance RMS Progresses Micro-Insurance Agenda Completing Pilot Project For China MiRT Forum series continues April 8-9, 2010 GC Micro Risk Solutions completes first microreinsurance transaction Panel of leading global reinsurers in support Tamil Nadu Chief Minister s Insurance Scheme for Life Saving Treatments Critical Illness Microinsurance Program Quota Share & Aggregate Stop Loss Microreinsurance 6

8 Catastrophe Microreinsurance

9 Catastrophe Microreinsurance Issues for Consideration Definition (?) Institutional risk transfer solutions protecting the poor Direct vs. indirect micro protection Design, delivery and distribution (full spectrum) Public private Government cat bonds voluntary microinsurance policy sales Analytics and Understanding Tools in emerging markets are limited relative to developed world Most existing models are not built to accommodate micro-type risks Lack of historical catastrophe/financial loss information Lack of unified/historical microinsurance-specific information 8

10 Catastrophe Micro(re)insurance A Survey of Existing Programs Sovereign Catastrophe Risk Financing Government Run Cat Insurance Programs Public-Private / Private Cat Risk Solutions Govt. of Mexico issues Cat Bond via World Bank MultiCat Platform Haitian Government receives US$7.75M CCRIF payout Govt. of Malawi issues Drought Derivative 9

11 Catastrophe Microreinsurance Potential Diversity of actors = diversity of opportunities Macro: Governments or governmental agencies; MFI networks; foundations; investors; microfinance service providers Meso: MFIs; traditional financial institutions; NGOs Hallmarks of new market include innovation and collaboration PPPs multiple levels and sectors of involvement Alternative project funding mechanisms Top-down innovation Covariant risk management as the core function of reinsurance Reinsurance market capacity and expertise to flow downwards Acts as a catalyst for meaningful market growth Reinsurance Community MFIs NGOs Govts Insurers Dev. Banks Microinsureds 10

12 GC Micro Risk Solutions

13 GC Micro Risk Solutions Broad Agenda Conduct marketing & education exercises across supply chain Generate dedicated microreinsurance capacity Create and manage GMF to support multiple lines of business and geographies Assist (re)insurers and MFIs to develop sustainable, salable and demand-driven micro(re)insurance products Expand geographic scope and diversity of microinsurance products Broaden distribution networks through the formation of working partnerships 12

14 Global Microreinsurance Facility (GMF)

15 GC Micro Risk Solutions Regional Accounts Program History Developed as Broking facility to provide P&C reinsurance coverages to small regional insurance companies Currently utilized by 160 regional insurers in 19 US states Total ceded premium growth: from $22M in 1995 to $70M+ in 2009 Why it works Capitalizes on the efficiencies in the mass placement of reinsurance programs by creating uniform processes Underwriting box clearly defined; account servicing streamlined Leverages law of large numbers; improves spread of Cat risks Excludes companies writing non-standard lines of insurance Provides cedants with a full range of reinsurance products Consortium of reinsurers providing support 14

16 GC Micro Risk Solutions Global Microreinsurance Facility Product Specific Panel of Reinsurers Supported Microreinsurance Products Supported Microinsurance Products Global Microreinsurance Facility Life Crop / Livestock Index Based Solutions Quota Share Aggregate Excess of Loss Occurrence Excess of Loss Accident & Health Property / Asset GC Micro Risk Solutions GMF Clients (MFIs, Insurers, etc.) Global Low Income Population Microloan Default Global Microreinsurance Facility 15

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18 GC Micro Risk Solutions Progress to Date Contacted well over 100 MFIs/micro(re)insurance organizations Obtained data relevant to 20 million 1/31/10 Working actively with several organizations on risk analysis, risk transfer and/or microinsurance program development Current key jurisdictions include India and Peru Knowledge is power : continue data collection efforts with MFIs worldwide to build a broader, more robust microfinance database GC Micro Risk Solutions Microfinance Products Data 1/31/10 Credit # of Loans Insurance # of Policies Other Organization Business Other Credit Life Health Property Package Misc. Total 1 8,438 8, ,804,467 1,052, ,390 3,380, ,837,898 2,837, ,071 45, , , ,900,430 11,900, , ,000 Total 1,812,905 1,052,991 12,423, , ,071 2,837,898 19,391,986 17

19 GC Micro Risk Solutions Global Microreinsurance Facility Products and guidelines to be developed with supplyand demand-side of market Business to be produced, vetted and serviced by GC Micro Business to be capitalized and underwritten by reinsurers GC Micro established to support a viable, sustainable and universally accessible microinsurance market Small MFIs unable to access reinsurance solutions independently Business volume/spread essential to building reinsurance market interest Brokered risk-pooling-facility concept built on historical precedent 18

20 Quantifying Catastrophe Risk Progress Micro-Insurance Roundtable Forum RMS Co-Sponsors Microinsurance Roundtable Forum April 8-10, 2010 RMS Progresses Microinsurance Agenda Completing Pilot Project For China June 8, 2009 GEM will aid sustainable social and economic development by providing free, reliable and uniform information on seismic risk and the impact of earthquakes around the world. 19

21 Microinsurance Today Trends Global microinsurance market as large as 4 billion individuals Microinsurance awareness and interest increasing Advantageous as ex ante risk management method Recognized as an essential financial tool for poverty alleviation, economic development Recognized as important source of new business growth Google Web Search Volume: "Microinsurance" Relative Search Volume /1/04-5/2/09 Interest Linear (Interest) 20