INSURANCE For development, resilience and recovery Stewart McCulloch VisionFund November 2016
our value proposition for children and families Progress out of Poverty Index + World Vision: Focus on graduation of resilient livelihoods our livelihoods sector approach Enable families to feed their children sustainably Giving families / children reason to be in school Enabling families to have adequate, sustainable incomes that are resilient to shocks & stresses Giving adolescents hope for a productive future building secure livelihoods for the rural poor: strengthening productivity & profitability of smallholder farmer families. savings groups, LVCD, microfinance, sustainable agriculture, CBDRM, graduation model for the ultra poor: providing an opportunity for the ultra poor to get off social protection and onto the economic ladder. food/cash, savings, technical training, productive asset, life skills adaptations for different contexts fragile contexts adaptation of graduation model for displaced populations incl. food for work / assets post disaster context adaptation of building secure livelihoods incl. recovery lending
Resilience Frequency Insurance for Development, Resilience and Recovery Day to day events people and communities are resilient to 1. Secure Savings 2. Small loans The larger events that people tend to worry about Products: 3. Credit life ++ 4. Business asset 5. Crop & Livestock 6. Low cost medical Infrequent and high impact events such as natural disasters 7. Recovery lending FDRM Disaster Insurance Resilience Impact
"Commercial" insurance facilitates growth To graduate out of poverty farmers must move from techniques passed down from mother to daughter over generations to new more productive methods CHANGE Farmers make significant new investments in inputs, animals, land or equipment to deliver the change in their circumstances at great cost and risk to them and their families. INVESTMENT Insurance transforms the farmers perception of the risk vs reward equation encouraging the investment and so facilitating the graduation process in a safe way. RISK BEHAVIOUR Over the medium to long term resilient livelihoods prosper far more than those that lack resilience. Both suffer shocks but the resilient livelihood bounces back faster and better RESILIENT GRADUATION
MULTI-PERIL CROP INS': Farmers investing in bold change Farmers make a huge new set of investments in land preparation, seed, fertiliser, crop care and eventually additional land expecting much higher yields NEED "Group Hybrid Multi Peril Crop Insurance (MPCI)" A "yield guarantee" based on the group's expected harvest Agronomists visit on germination, flowering and harvest INSURANCE Finances inputs, including insurance Insurance secures farmers investment AND loan repayment CREDIT Targeting a range of crops and areas to support 100,000 farmers in Tanzania Looking to drive forward in other countries FUTURE
BREED IMPROVEMENT: More higher yield cows in the herd Going from one or two traditional cows to four or five high yield cows is an expensive and risky venture; but a route out of poverty in Kenya NEED Life and health cover for the cow (which is tagged) The insurer provides AI and appropriate vet support (lower cost and risk than buying a cow or renting a bull) INSURANCE Finances the insurance premium and veterinary services Finances other inputs around the cow's procurement and care CREDIT Technology to manage veterinary care packages Other livestock products including for pastoralists Roll out to other countries FUTURE
SAFE BODA BODA: Safer transport from a business owner Public sector motorcycles are an essential service; but risky for riders, passengers and lenders Riders can increase their income by owning their bike NEED Covers the motor bike, passenger and rider Covers accidents and periods where the rider can't work Covers the period of the loan even if over 1 year INSURANCE Finances the insurance premium Finances the motor bike and helmet CREDIT Safemoto: Uber for motos in Rwanda Other specific asset insurances eg farm equipment FUTURE
ACCIDENT & HEALTH: An alternative to credit life? Clients often need better access to health care and medicine; but often can't get it. Thus increasing the impact of illness on their livelihoods; sometimes catastrophically NEED Covers accidental death and disablement for $3 per year Gives access to a targeted list of high value health care designed to be sufficient to deal with most needs INSURANCE The insurance acts as a significant marketing advantage to the credit or savings product CREDIT In process of roll out to 300,000 Cambodian clients Offering further cover to their families Evaluate and consider roll out to other countries FUTURE
"Meso" Disaster Insurance (FDRM) = Business Continuity MFIs lend less into major disaster situations, where funds are needed most Significant negative social impact Microinsurance products are not generally available, sustainable and/or affordable to alleviate the majority of the impacts of major shocks on MFI clients and the institutions Lack of relevant and affordable safety nets After a major shock, credible demand for loans increases but is often incorrectly perceived as too risky, hampering recovery and thus negatively impacting communities Unmet credible and urgent needs for loans Communities that are subject to more frequent shocks may be excluded from the microfinance services they need as they may be perceived as too risky. Lack of financial inclusion for the most vulnerable
Recovery lending: 25,700 families >60,000 children 2015, Myanmar Floods 2,800 clients 12,200 beneficiaries 2016, Ecuador Earthquake >6,000 clients >13,500 beneficiaries 2016, Zambia, Malawi, Kenya El Nino Droughts and Floods >12,000 clients >46,000 beneficiaries 2013, Philippines Typhoon Haiyan 4,900 Clients 20,000 Beneficiaries
Meso insurance: A four step end to end solution 1. Climate & Agricultural science Understanding of climate and seismic risk Understanding of agricultural exposures Definition of triggers relative to real risks 2. End to End FDRM modelling Modelling of portfolio risk Design of end to end capital & liquidity needs Contract to provide capital injection on triggers 3. Capital and liquidity funds flow Procures FDRM & Liquidity lines Manages cash, liquidity & funds flows Manages Tax, Regulatory & FX efficiency Contracts with GP & MFIs 4. Recovery support to MFIs Qualifies members Advises on preparation Supports post disaster Develops learning
Our Path: Innovate with value and scale in mind 1) Focus on specific needs of clients: Women and children Small holder farmers and pastoralists Micro and small business owners Find high value products that more than justify their cost 2) Bring to market, test and refine high value products: Enhanced credit life and health for families Agricultural and commercial products designed for growth Disaster (FDRM) insurance for MFI & Client business continuity Design products around the needs and economics of the poor and price appropriately for the value delivered 3) Partner, share, collaborate and evaluate Innovate with scale in mind from the start 1. Greater resilience for livelihoods over the long term facilitating continued development 2. Facilitation of the change and investment required for graduation 3. Financial inclusion of families previously considered too high risk because of the nature of their livelihood or their exposure to risk 4. Prices justified by delivery of real and significant value: "Insurance is as valuable a fertiliser"