Disaster Risk Preparedness and NatCat …mefin.org/files/reports/DRM_NatCat.pdfDisaster Risk...

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

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

Insurance in the Risk Continuum

Prevention and Risk Avoidance

(“Adaptation measures”)

Risk Retention Risk Transfer

e.g. Insurance

Additional Measures

NAP & Adaptation Policies

Map: Munich Re 2013

G7 InsuResilience approach

Goal: Additional 400 Mio. poor and vulnerable people are insured against NatCat by 2020

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

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

Progress of Microinsurance in selected countries in Asia

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

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

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

APEC Microinsurance Roadmap (MIR) (including DRM & NatCat Insurance)

Market drivers, market potential, market players


Microinsurance in APEC Emerging Economies MI Regula*ons

MI coverage ra*o 15%, 11.3M 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





*Market Drivers*

Source: GIZ RFPI Asia

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*


*Market Players*


Why to focus on disaster risk insurance for MSMEs

SMEs Significantly Contribute to the Global Economy

Source: APEC Policy Support Unit, Policy Brief No 8, 3 Dec 2013

Micro

61% 99% 91%


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


‘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

MSMEs demand for NatCat insurance

6/18/17

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…

6/18/17

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


Findings…

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


Findings…

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


Findings…


A complex natcat environment needs a comprehensive approach in identifying DRF options for SMEs


Recommendations

•  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

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]

Thank you!

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