83985 Global Index Insurance Facility Expanding Access to Index-Based Insurance in Developing Countries October 2013 Newsletter (Issue #7) Global Facility for Disaster Reduction and Recovery Organizes Fifth Resilience Dialogue Series during 2013 WBG-IMF Annual Meetings In this Issue Global Facility for Disaster Reduction and Recovery organizes 5th Resilience Dialogue Series during 2013 WBG-IMF Annual Meetings. IFC Access to Finance Manager Rachel Freeman is enthusiastic about new insurance projects in the Philippines and Indonesia. National Agriculture Insurance Company of Senegal Executive Director, Pape Ndiaye, reflects on the GIIF groundnut index insurance pilot in Senegal. Deputy Prime Minister from Thailand, Kittiratt Na-Ranong, and European Commissioner for Humanitarian Aid, Kristalina Georgieva, discuss disaster resilience News Indonesia: IFC Partners with MAIPARK to The Global Facility for Disaster Reduction and risks to achieve poverty reduction and shared Provide Quake-Index Insurance Recovery of the World Bank Group launched the prosperity goals. fifth round of the Resilience Dialogue Series “Poverty In his opening remarks, Mitsuhiro Furusawa, See More Reduction in a Time of Extremes: Shared Prosperity Vice Minister of Finance for International Affairs for through Resilience” during the 2013 WBG-IMF Japan emphasized that disaster risk management Philippines: IFC, CARD and Pioneer Insurance Annual Meetings. Participants included the Deputy must be a part of the overall development agenda. to design typhoon insurance for Filipino Prime Minister of Thailand, Minister of Finance from Eighty countries - most of them poor - are seriously farmers Columbia, EU Commissioner for Humanitarian Aid, vulnerable to natural disasters. He also highlighted and the World Bank Vice President for Sustainable the important role to be played by communities who See More Development, with opening remarks by Japan’s must be informed and prepared before disasters Vice Minister of Finance for International Affairs. strike because they are critical for maintaining Mozambique / Guy Carpenter: Drought The event was hosted by the European Union, social order. Japan has led global efforts on disaster triggered claims totaling over US$200,000 in Government of Japan, USAID and the World Bank. resilience following the earthquake and tsunami payouts The fifth round of the Resilience Dialogue which devastated Japan in 2011. (See http:// See More Series focused on the impacts of disasters on www.preventionweb.net/english/professional/ poverty dynamics, as well as the opportunities publications/v.php?id=29162) for an overview of to build prosperity through resilience. All of the Japan’s Lessons Learned after the 2011 disaster.) Connect with Us invited guest speakers highlighted the need to invest in managing disaster and climate Continued on page 2 www.ifc.org/GIIF Guerda Pierre, Haiti Part of a continuing series of profiles highlighting index insurance successes and challenges: GIIF’s objective is to expand the use of index this story features the impact insurance can have in the lives of struggling entrepreneurs in insurance as a risk management tool in disaster-prone countries agriculture, food security and disaster risk reduction. According to a recent UN Officer Guerda Pierre was one of the victims of (For the full story about the challenges of providing for Disaster Risk Reduction report, natural Hurricane Sandy in 2011. The home she shares insurance to microentrepreneurs like Guerda disasters have cost the global economy $2.5 with her three children and mother was completely in Haiti, see Fonkoze Director Anne Hastings’ trillion since 2000 and affected millions of flooded, and all her merchandise was destroyed. In blog on CGAP discussing their new reinsurance people. addition the plantain trees and beans in her garden company MiCRO: http://www.cgap.org/blog/ could not be harvested. Guerda had paid $5.30 standing-firm-clients-when-catastrophe-hits) About the GIIF Initiative for her insurance policy with Fonkoze when she Launched in 2009, the Global Index Insurance received her 6-month loan of $176. That was 3 Facility is a multi-donor trust fund financed percent of her loan value paid one time at the start by the European Union, Japan and the of the loan for 8 months of coverage. Following Netherlands and implemented by IFC and the World Bank. the storm, she received a cash payment of about $59, the cancellation of her debt with Fonkoze, and a new loan, which she received before Christmas, the busiest season of the year for her. As you can imagine, she and many others like her in Haiti are now big fans of the insurance program. Guerda Pierre and her children Global Index Insurance Facility Issue #7 | Page 2 Fifth Resilience Dialogue Series Continued from page 1 The ministers from Thailand and onslaught of a tsunami, earthquakes, volcanic communities affected by droughts can invest Columbia share a common history of eruptions, mudslides and in 2011 $6 billion in rainwater harvesting and when droughts frequent disasters and high public and private in economic costs from the recurring sea begin cull their herds to prevent widespread economic costs following disasters. Kittiratt warming phenomenon El Niño. Kristalina livestock losses due to vanishing grasslands. Na-Ranong, Deputy Prime Minister and Georgieva, European Commissioner As for the role to be played by the World Minister of Finance, Thailand referred for Humanitarian Aid, EU, spoke Bank in disaster resilience, Rachel Kyte, VP to the economic cost of the 2011 floods passionately about the disproportionate for Sustainable Development, World in Thailand which accounted for half of impact of disasters on the poor, and fragile Bank declared that disaster risk resilience the government budget - $40 billion. The and conflict-affected countries. The poor is a growth business for the Bank. Echoing government of Thailand is trying to set up represent eighty percent of the victims an investment fund of $11 billion for disaster of natural disasters. She emphasized that the concerns of the European Commissioner mitigation and prevention investments; poverty reduction will not be possible for Humanitarian Aid, she also emphasized to date only $1.1 billion has been raised. without disaster resilience, and the role to that the poor are the least resilient and Mauricio Cardenas, Minister of Finance be played by financial instruments like the most vulnerable and the importance and Public Credit, Columbia coined the insurance which can help communities, of considering short-term and long-term discussion group’s key phrase which described banks and governments mitigate the risks consequences, e.g. GDP impact (short-term); the overall mood “Extreme is the new norm”. from natural disasters. Communities can malnutrition and interrupted schooling for Since 1979, Columbia has suffered the also engage in risk mitigation; for instance, children (long-term). Rachel Freeman Enthusiastic about New Disaster Insurance Projects Regional Manager, IFC Access to Finance Advisory in East Asia and the Pacific, under whose guidance and supervision Advisory Services programs, including GIIF, are implemented in her region. Q: Is there good growth potential for IFC offers risk mitigation products that index insurance in Asia? safeguard farmer assets and cover bank A: There is strong growth potential for risks so banks can increase loans to farmers. the index insurance market in Asia. The The Center for Agriculture and Rural growth in access to finance in Asia for Development Insurance Agency (CARD), farmers and SMEs will be adversely one of IFC’s partners in the Philippines, impacted without disaster insurance plans to offer typhoon insurance to as the region is increasingly prone to hundreds of thousands of its farmer clients disasters with the impact from climate over the next few years. change. Sixty percent of the global In Indonesia, the GIIF Team will work losses from disasters was sustained by closely with reinsurer PT Asuransi MAIPARK the East Asia Pacific region over the past Indonesia to develop a new index insurance 20 years, and economic losses from natural product to help protect banks and MFI disasters in 2011 alone in this region were clients that provide loans to individuals and over $250 billion. micro, small and medium enterprises from Ms Rachel Freeman losses following earthquakes and other disasters. More than 12 million Indonesians A: Index insurance is a great vehicle to take Q: Are the right type of index insurance risk mitigation in Asia to the next level. We live and work in earthquake-prone zones, products being developed for Asian have a huge program in energy efficiency with economic exposure reaching an markets? in Asia which focuses on reducing carbon estimated $79 billion. These risks are A: Yes – I am particularly pleased to see the especially high in areas such as Yogyakarta emissions and the adverse effects of climate Global Index Insurance Facility supporting and Padang, where the worst-hit banks change. That’s an important strategy but the development of typhoon index lost between 15 and 35 percent of income the World Bank Group also has to realize insurance for farmers in the Philippines and following recent earthquakes. The project that we cannot prevent climate change, earthquake index insurance for banks and hopes to facilitate $50 million in additional and we need risk mitigation strategies to microfinance institutions in Indonesia. The financing for the working poor and micro address the negative impact of climate Philippines is the third most disaster-prone and small, medium enterprises by 2019. change. country in the world, with an average 20 typhoons per year. Typhoon-related losses in the Philippines have surpassed $2.5 Q: How can index insurance be billion since 2009. The hardest hit are incorporated into an overall IFC risk farmers, and since agriculture accounts for management strategy to address 11 percent of GDP in the Philippines and climate change and natural disasters one-third of all jobs it is important that in Asia? Global Index Insurance Facility Issue #7 | Page 3 GIIF Groundnut Index Insurance Pilot in Senegal: Interview with Pape Ndiaye Executive Director, National Agriculture Insurance Company, Senegal Mr Pape Ndiaye, Executive Director of the progress. We modified the design National Agriculture Insurance Company of the product according to farmers’ of Senegal, reflects on the achievements preferences (revised payout triggers, of the second pilot for groundnut index- two types of products “groundnut 90 insurance in Senegal and how to scale up. days” and “groundnut 110 days”). Also, PlaNet Guarantee, the private sector partner we conducted the awareness-raising implementing the pilot, hopes to sell index campaign for a longer period, starting a insurance to 7,000 farmers in 2014. month before the June sales window. Q: The second pilot for index-insurance Q: Do you think these results can be for groundnut farmers in Senegal has just scaled up, and what are the key next been completed. What were the results? steps to reach this goal? A: We have not yet completed the A: Yes, absolutely. Index insurance is a evaluation of this second pilot. However great opportunity for Senegal. Almost two Mr Pape Ndiaye what we can say as of now is that our thirds of our population work in agriculture results are still in the pilot phase but but credit to agriculture is unfortunately What are the benefits of public-private much above last year’s results. We have still limited. Index insurance can therefore partnerships in agricultural insurance? sold index-insurance to about 1,700 protect farmers against adverse weather farmers (compared to a target of 7,000) A: The CNAAS has largely benefited from events while strengthening access to credit and reached 4,500 farmers in awareness- this PPP. First, from a financial point of view, in a sector that really needs it. The market raising training (compared to a target agricultural insurance gets a 50 percent of 10,000). It seems that the reasons for will develop and offer a wider range of government subsidy and is exempt from the this performance are the late start of the products (including area-yield products) 10 percent insurance tax. Moreover, from awareness-raising campaign; its overlap as well as a wider range of crops (such as an operational point of view, the CNAAS with cropping season activities; the lack of rice). To do so, we will first need a better benefits from the network of government awareness-raising tools; the participation data market infrastructure (weather data agencies for awareness-raising and risk of only one MFI as a delivery channel from rain gauges or satellites, agriculture compared to an initial target of two; and management, even though cooperation in production data) as well as a better the insufficient coverage of one of the this area could be enhanced. But we could awareness among our customers, which target areas due to the lack of weather go further than this. For instance, it would requires time and adaptation to local data. be great to include agricultural insurance languages. as a mandatory component of agricultural Q: What was done differently between Q: The National Agricultural Insurance development and agricultural lending the first pilot launched last year and Company of Senegal (CNAAS) was projects in the future. this pilot in order improve take-up? created five years ago as a public- A: The encouraging fact is that, compared private institution in charge of under- to the first pilot, we have made significant writing crop and livestock insurance. news from the giif team The GIIF team participated in the Global Index Insurance Facility Technical Workshop with GIIF implementing partners in Delhi from October 7-8, including a field visit to Sonepat in Haryana to talk with Indian rice farmers about index crop insurance. India has the largest index insurance market in the world covering close to 30 million farmers - the majority with yield-based index insurance, 9 million with weather index insurance and several hundred GIIF Team in Haryana, India with rice farmers thousand covered by a combined yield/ weather index insurance. Strong public- The findings and recommendations of the The GIIF team is working to scale up existing private partnerships provide support for the GIIF mid-term evaluation were discussed in projects, ensure that GIIF partners stay on market and ensure access to finance for a workshop in Brussels in September 2013. a path to commercial viability and deepen farmers. It has taken 7-8 years to develop The evaluation concluded that the program their work with local communities, farmers the index insurance market in India. has achieved good results at the macro-level. groups, cooperatives, and agribusinesses. Global Index Insurance Facility Issue #7 | Page 4 Events internationaL ConferenCe on insUranCe anD reinsUranCe for agriCULtUraL risKs January 29-31, Marrakech Morocco [African Insurance Organization, the World Bank, the African Center for Catastrophe Risks, and the Société Centrale de Réassurance] http://www.african-insurance.org/newsevents-eventitem.php?intID=214 aCP oPen hoUse October 30, Brussels Belgium [GIIF will make a presentation and will have a stand]. http://www.acp-eu-tbt.org/nc/news/news/news-detail/article/4th-acp-open-day-october-30-2013-brussels/ inDeX insUranCe in the meDia MiCRO http://www.cgap.org/blog/standing-firm-clients-when-catastrophe-hits MicroEnsure http://www.microensure.com/news.asp?id=276&start=0 Kilimo Salama http://aon.mediaroom.com/Syngenta-Foundation-wins-first-Aon-Client-Innovation-Award PlaNet Guarantee http://spore.cta.int/fr/component/content/article/18-spore/dossier/18/7479-assurance-indicielle http://issuu.com/icpubs/docs/abkf-16-ednum http://www.rfi.fr/emission/20130707-2-actu-environnementale-assurance-agricole-mali-le-boom-trafic-dechets-dangereux the merits of PortfoLio insUranCe anD PUBLiC-PriVate PartnershiPs Guy Carpenter’s index insurance is distinguished by several unique features, including its use of a “portfolio pricing” model where the sum insured in a given region forms the basis for risk calculation. Compared to the alternative where each individual plot is priced separately, this method can result in lower premium costs by including more farmers and diverse areas in a group. Guy Carpenter also implemented its product at the portfolio or “meso-level”, where an aggregator (e.g. a delivery channel, association or other farmer group) purchases one insurance policy to cover its group members. The experience of other GIIF clients has shown that portfolio sales are less expensive than retail index insurance sold to individual clients. Guy Carpenter’s index insurance model is supported by close public-private collaboration which is critical when setting up new markets. Two agribusiness firms, Olam and SANAM, covered their cotton farmers with index insurance designed by Guy Carpenter and provided by two insurance companies: Hollard and EMOSE. The premiums for the insurance were paid by the Cotton Institute of Mozambique (IAM) in a successful public-private partnership. in 2012, drought triggered claims totaling over Us $200,000 in payouts. The payouts exceeded the premiums paid but that is expected for particularly bad years. IAM plans eventually to expand index insurance coverage to all cotton farmers in Mozambique – approximately 200,000 farmers. Contacts Gilles Jacques Galludec Selin Konrat Fatou Assah Rachel Sberro GIIF Program Manager Associate Operations Analyst GIIF IBRD Program Coordinator IBRD Research Analyst ggalludec@ifc.org skonrat@ifc.org fassah@worldbank.org rsberro@worldbank.org