4 7 11 MIPSS - Microinsurance · 2017-09-21 · framework and the strategy on MI meet, exchange and...

www.microinsurance.ph

What’s Inside

W hen GIZ-Microinsurance

Innovations Programme

for Social Security

(MIPSS) launched the MIPSS

Newsletter, or MNL, exactly two

years ago (October 2009), the fast

development of the MI landscape in

the Philippines could not be fore-

seen. In a country where life insur-

ance outreach is but 13.92% of the

population, overall insurance pene-

tration is only 1.04% of the 24.9 Mil-

lion poor Filipinos and some 2.9

million (2009 data) resorting to

some kind of financial risk protec-

tion, it is a remarkable process to

follow-up the regulatory & market

response since the regulatory

framework and the strategy on MI

were launched in January 2010.

Since then, a total of 50 MI products

have been approved (33 life and 17

non-life). In particular, 19 insurance

companies and 17 mutual benefit

associations (MBAs) offer MI

products, while 14 MBAs are fully

engaged in MI business, enabling

the insurance of approximately 2

million members. The Philippine

government’s approval of the Road-

map to Financial Literacy on Mi-

croinsurance in 2010 and the Per-

formance Standards for Micro-

insurance in 2011 marked another

milestone in the MI development in

the Philippines. GIZ-MIPSS has

contributed in this unique process

where public and private sector

meet, exchange and advance in a

(Continued on page 2)

GIZ-MIPSS Champions Public-Private Partnerships for Microinsurance By Dr. Antonis Malagardis

▪

IPSS

MicroinsuranceNewsLetter

In Pursuit of an

Insurance Culture

Page 2

Pawnshops as

Channels for Risk

Protection

Page 4

Inevitable: Is the

Philippine Insurance

Industry Ready for a

Big Shake?

Page 5

Area-Based Yield

Insurance Ready for

Replication

Page 6

SEGURO: Setting

Performance

Standards for

Microinsurance

Page 8

Insurance Commissioner Dooc giving one of his inspirational speeches at a GIZ-supported capacity-building activity on microinsurance advocacy for public and private sector representatives.

4

7 11


fully participatory approach. Building further on this

approach, the MIPSS team has partnered lately with

some champions in MI such as BPI Globe BanKO to

offer MI through mobile technology, Cebuana

Lhuillier Insurance Solutions to use their extensive

pawnshops network to advocate and sell further MI

products and Bank Assurance Corporation

(Malayan Insurance Group) to explore the potential

of drugstores as efficient distribution channels for MI.

These highly promising public-private partnerships

also build on the unique experience in developing

and marketing a NatCat insurance product with Mu-

nich Re and CLIMBS Life and General Insurance

approved by the Insurance Commission in October

2010. Private partners – insurance providers and dis-

tribution channels -will be using the nationwide Finan-

cial Literacy Campaign on MI launched by the gov-

ernment with the support of GIZ, among others, to

brand their products but keeping in mind that

‘financial literacy is educating, not marketing and

advocacy is convincing not selling’. Through the

services provided by the GIZ-supported Microinsur-

ance Resource Center (MiRC), in collaboration with

the Father Saturnino Urios University (FSUU) in

Butuan, Caraga– the first of this kind in the Philip-

pines and the third institution to be accredited as

training agency for future MI agents – private sector

involvement in MI is expected to gradually raise, par-

ticularly in the poorest areas of the country. Providing

financially sustainable agroinsurance in the Philip-

pines - with the introduction of the the most effective

tools based on index-based solutions - by offering

equal opportunities for competition to the Philippine

Crop Insurance Corporation (PCIC) and private

insurance companies is a further breakthrough to

aim at in 2012 and beyond. Opening the eyes of the

private sector to the huge potential of the MI business

for the benefit of the low-income persons in Philip-

pines and beyond is the only right path and public

agencies have here a decisive enabling role to play.

(Continued from page 1)

MicroinsuranceNewsLetter No. 5

GIZ-MIPSS Champions Public-Private Partnerships for Microinsurance

In Pursuit of an Insurance Culture by Avelino Filio

C reating an insurance culture among Filipi-nos in general, and the low-income sector in particular, is not and will never be an easy task. The promise this desired culture

is meant to bring is enough motivation though to continue pursuing its cultivation. After all, past, pre-sent and future efforts, be it in the field of micro-insurance, microfinance or any other development endeavors all aim at the emancipation of the poor from the shackles of poverty and helplessness.

But what will it take to bring about an insurance culture? Firstly, it requires dedicated individuals with the heart to chase that common vision and with the collective minds to craft the appropriate strategies to achieve it. Secondly, creating an insurance culture presupposes a clear understanding of the micro-


Insurance Commissioner Dooc leads graduates of the Training on Micro-insurance Advocacy in signing their promise as MI advocates.



insurance landscape, with the knowledge, for exam-ple, of explaining the low microinsurance uptake de-spite its promise of affordable risk protection for the Filipino poor. Thirdly, more than the involvement of microinsurance stakeholders, their commitment to per-form their share of roles and responsibilities is crucial in both creating and sustaining an insurance culture.

All of these three key ingredients uphold the

Financial Literary Roadshow on Microinsurance

Advocacy, and are in fact the very essence of the

initiative. The road show, or sometimes called cara-

van, is a series of activities aimed at creating a critical

mass of microinsurance advocates from various stake-

holders who shall champion the cause of microinsur-

ance from macro-, meso-, down to the micro-level.

These activities will be conducted in 16 regions

through the collaboration of GIZ-MIPSS with the Insur-

ance Commission, Department of Finance – National

Credit Council and the Asian Development Bank –

Japan Fund for Poverty Reduction.

Before its full takeoff, a series of planning and

consultations were done to map out the implementa-

tion blue print. Participating in these preliminary activi-

ties were key stakeholders from the regulatory

agency, national government agencies, intermediar-

ies, donor agencies, support institutions, local govern-

ment units (LGUs), service providers, and legislators.

Out of the blue print, the first salvo of the Training on

Microinsurance Advocacy (TOMA) for LGUs was

undertaken. Participated in by the different Quezon

City LGU offices, the training served as a springboard

to promote microinsurance to the LGU’s constituents

and as an avenue to design more effective approach

for developing advocates on microinsurance. This first

TOMA resulted in the integration of microinsurance

into the LGU’s health program, particularly for dengue,

while the incorporation of microinsurance in

other programs such water and sanitation, liveli-

hood, and peace and order are seriously being looked

into.

Using the earlier success of TOMA as an impetus,

the Speakers Bureau training was also conducted. It

sought to provide the needed knowledge, skills and

attitudes to embark on a successful MI advocacy pro-

gram. Further, the graduates of the Speakers Bureau

now comprise the pool of trainer-advocates who can

be tapped as resource persons for the roadshow.

With the pieces to complete the advocacy picture in

place, the first regional run of the Training on Micro-

insurance Advocacy and the Advocacy Seminar on

Microinsurance for the Eastern Visayas region was

held in September. The TOMA afforded the partici-

pants with competencies in developing effective micro-

insurance advocacy strategies and key messages for

the different stakeholders. The seminar, on the other

hand, became the platform for the public and private

sectors to develop a common understanding of micro-

insurance, including the important regulations and pol-

icy circulars. The appreciation and welcome for the

roadshow activities were replicated, and in fact sur-

passed, during the second roadshow in the Caraga

region in Mindanao organized in October.

Departing the two regional roadshows were more

than 80 microinsurance advocates representing differ-

ent key stakeholders and more than 150 microinsur-

ance-aware individuals who carry with them the mes-

sage that ―financial literacy is educating, not marketing

and advocacy is convincing, not selling”. These are

the very same people who have committed to engage

more individuals their its fold. They are but the first

batch of that critical mass who will ultimately nurture

the insurance culture in the country.

With these positive results-yielding initiatives, the

seeds of microinsurance advocacy have been planted.

With proper care

and nurture, we

shall soon be reap-

ing the fruits of an

i n s u r a n c e -

conscious Filipino

poor.


Left: GIZ-MIPSS Coor-dinator Avelino Filio conducting the show at the Advocacy Seminar on MI; Right: Depart-ment of Finance—National Credit Council Director Joselito Almario happily pointing to local media’s top billing for the Financial Literacy Roadshow on Micro-insurance Advocacy in Eastern Visayas


P awnbroking has been an

activity of finance as old as

the ancient civilizations of

the Greeks, Romans and

Chinese themselves. The pawning

business has traditionally involved the

provision of loans to people in ex-

change for personal properties tagged

as collateral. Pawnshops have pro-

vided that immediate monetary relief -

that "fast cash" - to people in financial

emergencies who can’t secure credit

from elsewhere.

The purpose of pawnshops and

the range of its services on offer,

however, have largely evolved from

what they were thousands of years

ago. Many pawnshops now double

as retail stores selling unclaimed col-

laterals and imbibing somewhat an

adventurous aura of discovery remi-

niscent of garage sales and flea mar-

kets.

Some have operated in the name

of charity, as has been done by Mex-

ico's not-for-profit Nacional Monte de

Piedad, which offers low interest rates

(keeping the poor in mind) and also

earmarks a portion of earnings for

charitable donations and scholarship

funds.

Other pawnshop chains, mean-

while, have capitalized on the wide

reach/low-cost of the internet platform

to conduct online pawnbrokerage.

In the Philippines, more than

10,000 pawnshops have come to pro-

vide a variety of financial services -

short-term loans, bills payment,

money remittances (sending and re-

ceiving), and mobile phone balance

top-ups. It has gradually and success-

fully turned the industry's previously

seedy image from by marrying its

business strategies with community-

conscious services geared to the low-

income sector.

As a financial institution perceived

as friendly to the poor, pawnshops

are an ideal promoter of risk protec-

tion for the low-income sector. The

Philippines' major chain of pawn-

shops, Cebuana Lhuillier, under-


Pawnshops as Channels for Risk Protection by Diana Almoro

GIZ-MIPSS and Cebuana Lhuillier Insurance Solutions seal partnership deal. From L-R: Dante Portula, MIPSS Senior Fi-nance Adviser, Dr. Antonis Malagardis, MIPSS Program Manager, Mr. Jean Henri Lhuillier, PJ Lhuillier Inc. President and CEO, Mr. Jonathan Batangan, CLIS General Manager.

stands this and has leveraged its

strategic position to offer micro-

insurance to its clientele through its

subsidiary company, Cebuana

Lhuillier Insurance Solutions

(CLIS).

The company's Alagang Ce-

buana Plus (ACP) microinsurance

product provides comprehensive

coverage of up to PhP20,000 for

four months, with its fire insurance

feature also extending a PhP5,000

cash aid. The premium costs 20

centavos per day for 45 days and

claims are promised release within

two days from filing.

In 2010, Alagang Cebuana

Plus proved to be the saving grace

for some 130 families whose

homes went up in flames during

one night’s tragic conflagration.

Their prudence in purchasing mi-

croinsurance from Cebuana

Lhuillier sustained them while dis-

placed and helped rebuild their

homes. Underwritten by Malayan

Insurance Co., ACP is available to

any Filipino between the ages of 7

and 70 and can be accessed from

CLIS’ 1,200 branches.

The pawnshop as a delivery

channel for microinsurance is still

far from being common knowledge

to Filipinos. Its potential to effec-

tively expand the microinsurance

industry is slowed by the lingering

low awareness of microinsurance

and low financial literacy, espe-

cially of the poor. To speed up the

pace, GIZ-MIPSS has partnered

with CLIS to launch an advocacy

campaign for microinsurance.

GIZ-MIPSS will complement

the strengths of CLIS’ product and

network of shops with its technical

capacities and materials for en-

hancing the understanding and

acceptance of microinsurance.

The partners will embark on a na-

tionwide microinsurance advocacy

campaign which simultaneously

provides direct access to CLIS

microinsurance. The CLIS-GIZ-

MIPSS partnership is expected to

raise the awareness of microinsur-

ance, especially in peri-urban and

rural areas. The heightened

awareness of microinsurance will

urge clients to flock to the ever

expanding pawnshops - acting on

a demand for risk protection en-

hanced by two innovating part-

ners.



J apan’s wasn’t. Experts say that the estimated

amount of payout for the 2011 Japan earth-

quake could exceed USD 15 billion. Claim pay-

outs, to date, have already depleted the insur-

ance providers’ earthquake reserves, even as the gov-

ernment set out USD 6.6 billion in supplementary

budget to help private insurers.

What if the same twin catastrophes of earthquake

and tsunami happened to the Philippines? Can the in-

surance industry survive? Can the government help?

Can the people recover?

In truth, the question is not if it happens, but when

it happens.

Catastrophe incidences are measured by their re-

turn period. Yes, catastrophes are meant to return! In

fact, 2009’s Typhoon Ketsana/Ondoy is said to have a

return period of 40 years. That means, 40 years from

now, a typhoon with the same devastation capacity is

supposed to cost the Philippines USD 130 million in

damages, killing more than 70 individuals and displac-

ing another 300,000.

One might wonder which catastrophe is due for

return soon. The Marikina Valley Fault system has not

moved for the last 200 years. Its return period is esti-

mated to be between 200 to 400 years. What happens

if it ―moves‖? The fault possesses the threat of an

earthquake magnitude 7 or higher. When triggered

within the metro, fatality is predicted to reach 35,000

with more than 120,000 injured and approximately 175,

000 buildings damaged. When this risk is inadequately

mitigated, it will not only cripple insurance providers, but

it can decimate the entire insurance industry, both its

finances and reputation.

At the 9th Catastrophe Conference for the Asian

Insurance Industry held in Beijing last June, Dr. Hua He

of Munich Re stressed several important messages

related to natural catastrophe risk:

1. Natural catastrophe risk is too important and too

complex, it should be taken seriously and profes-

sionally. One may spend years making the perfect

prediction, yet actual outcome still says otherwise.

2. Risk assessment: ―Don’t let one rotten apple spoil

the whole barrel.‖ Insurance providers must be

aware of their exposure at all times and strive for

best quality exposure data, always expecting the

unexpected. Models may help predict outcomes,

but these should only be considered as guides.

3. Risk Pricing is a continuing search for adequacy.

Technical advancements for natural catastrophe



Area-Based Yield Insurance Ready for Replication By Jimmy Loro

F ilipino farmers have had to contend with a

flood of agricultural problems – continuing

decline of productivity, agrarian reform inef-

fectiveness, market overtaking by conglomer-

ates. In recent years, the threat of climate change

sneaked into this list, pushing farmers to search even

more fervently for a safeguard mechanism for their

crops.

GIZ-MIPSS, in cooperation with the Enhancement

of Food Security in the Visayas Project (EFOS), has

been supporting the Philippine government in providing

farmers of the Leyte province with the Area-Based

Yield Index Insurance (ARBY). In partnership with the

Department of Agriculture (DA) and the Philippine Crop

Insurance Corporation (PCIC), ARBY has been suc-

cessfully pilot-tested in six irrigated areas of the said

province.

With Leyte farmers’ demand for ARBY established,

the Department of Agriculture is gearing up to replicate

this alternative crop insurance product to other regions

of the Philippines by 2012.

ARBY replication is aligned with the Philippine gov-

ernment’s mitigation activities against possible reduc-

tions in rice yield brought by expected natural catastro-

phes, commonly flooding in November – December

when typhoons hit the country. An average of 20 ty-

phoons hit the country per year devastating agriculture

and plunging subsistence farmers deeper into poverty.

Leyte Province has an estimated 64,000 farmers

cultivating rice for the dry and wet cropping seasons.

However, only about 2% of this farming population or

1,280 are enrolled by the Philippine Crop Insurance

Corporation (PCIC) in the two cropping seasons.

GIZ-MIPSS will likewise support the replication of

ARBY in other regions, scaling up assistance with its

planned use of remote sensing technology for 2012

and beyond. This technology will ensure ARBY’s prom-

ise of quick provision of area yield results and of pay-

outs.


2012 and Beyond

modeling is an ongoing process and insurance pro-

viders will have to live with imperfection of existing

models.

4. There is a possibility that risk may significantly out-

grow portfolio accumulation. The probability distri-

bution of natural catastrophe risk is long-tailed

whereas a single catastrophic event may incur an

almost ―infinite‖ amount of loss.

In response to the earlier posed questions about

the Philippine insurance industry’s capacity to cope, the

answer is a definite NO. That is, unless and until all

stakeholders do their share in mitigating these catastro-

phic risks by securing adequate personal and property

insurance coverage. Specifically for insurance provid-

ers, they should comply with the regulatory standards

and invest in the development of products that address

natural catastrophe. Finally, survival, help and recovery

can only become possibilities if the government advo-

cates a multi-level catastrophic risk sharing mechanism

among insurance providers, reinsures, and the local

and national government.

GIZ-MIPSS is positioning itself as a catalyst in pre-

paring all stakeholders for the possible and frightful

―shake‖ to the insurance industry by strengthening pub-

lic-private partnerships, which is a promising path to-

wards risk mitigation in the context of natural catastro-

phes, such as earthquakes. Since its inception, MIPSS

has established the network for promoting closer col-

laboration between the public and private sectors, con-

tributing to the Philippine insurance industry a platform

for dialogue on stepping up to the challenges of natural

catastrophes. Without a doubt, this platform will con-

tinue its value in limiting earthquakes’ catastrophe to

property, and not to the entire insurance industry.




I n 2010, more than 5 billion people in the world had

mobile phone subscriptions. This number is as-

tounding, considering the 86% escalation from 719

million subscribers a decade ago. Subscriptions in

developed countries have actually reached saturation

point, and worldwide, mobile subscriptions growth has

been slowing down. Not for the so-called developing

region, though. Asia and the Pacific alone is only rev-

ving up, with China and India expected to have added

some 300 million subscriptions by the end of last year.

And why not this growth, when the increasing de-

mand for information and communications services

opportunely coincided with technological advances,

growing infrastructure and plummeting retail prices,

placing mobile phones in the hands and ears of more

and more people.

Our information society’s information necessity

glued the mobile phone inside every business toolkit. In

the business of finance, mobile phones have been in-

strumental in trafficking information that delivered finan-

cial services, especially to individuals residing in re-

mote areas and to those who are obstructed from ac-

cessing traditional banking systems.

Commonly referred to as m-commerce or m-

banking applications, mobile financial services can

range from individual or third-party transfer of funds or

credits, to deposits, and payment of services. The

branchless bank model and the mobile payment sys-

tem approach both capitalize on the utility of mobile

phones to extend banking services quickly and with

relatively lower transactions costs. WIZZIT Payments

service in South Africa and Safaricom’s M-PESA in

Kenya are just some examples of mobile banking initia-

tives.

That mobile phones are valuable to bringing finan-

cial services to the unbanked and underbanked bodes

no doubt. In the Philippines, BPI Globe BanKO Inc.

(BanKO) is one such company faithful of the mobile

connectivity platform and seizing the opportunity pre-

sented by 79 million Filipino mobile cellular subscribers.

As the country’s first mobile-based and microfinance-

focused savings bank, BanKO strives to provide secure

and convenient financial services to the low-income

sector by leveraging on its combined assets and infra-

structure in banking and telecommunications.

In its proactive microfinance services, BanKO has

partnered with BPI-Philippine American Life and Gen-

eral Insurance Co., to provide two innovative micro-

insurance products – PondoKO and PuhunanKO. Pon-

doKO is BanKO’s microsavings product which also

bundles with it a free life insurance coverage (if the av-

erage daily balance requirement is maintained). Puhu-

nanKo, on the other hand, is a microloans product that

also provides life insurance and loan coverage.

Pushing its pioneering strokes further, BanKO is

also working on providing microinsurance through its

mobile cellular platform. PaniguroKO is BanKO’s mi-

croinsurance product, underwritten by BPI-Matsui Su-

mitomo Insurance Corp., offering protection against

damage to property and against accidental death. It

offers a PhP 5,000 cash assistance in case of fire and

lighting to the home or place of business, a PhP 2,500

cash assistance in case of flood, typhoon and earth-

quake and an accidental death benefit of PhP 50,000

for beneficiaries of the insured party. BanKO account-

holders can soon avail of PaniguroKO coverage

through their mobile phones.

PaniguroKO’s backbone is fastened in the GIZ-

MIPSS-developed Bahay-Buhay-Kabuhayan or BBK

(Home-Life-Livelihood) non-life microinsurance product

prototype. Developed together with the Product Devel-

opment Technical Working Group, and approved by the

Insurance Commission through the facilitation of the


Going Mobile for Microinsurance By Diana Almoro


Philippine Insurers and Reinsurers Association

(PIRA), BBK is meant as a cash assistance insur-

ance rather than as an indemnity insurance.

BanKO’s adoption of a BBK-inspired micro-

insurance was only the beginning of its alignment

with GIZ-MIPSS’ vision of an improved risk pro-

tection scenario for the Filipino poor. It also

signed a deal with the program to enhance finan-

cial literacy on microinsurance. Together, BanKO

and MIPSS will set out to advocate for the impor-

tance of microinsurance and to educate people

about the use of mobile phones as tools for ac-

cessible banking, and ultimately, for accessible

insurance coverage.

On the path of developing innovative delivery

channels for microinsurance, GIZ-MIPSS will be har-

nessing the great potential of mobile phones to deliver

microinsurance anywhere in the more than 7,000 is-

lands of the Philippines. Through BanKO’s nationwide

network of partner outlets equipped with the appropri-

ate technologies for financial transactions, this innova-

tion is made possible.

A few years from now, statistics will depict a new

picture of mobile phones – their astounding contribu-

tion to the microinsurance industry.



Embarking on another innovation journey, MIPSS Program Manager Dr. Antonis Mala-gardis signs a partnership agreement with BPI Globe BanKO President Tessie Tan for a joint MI advocacy initiative.

SEGURO: Setting Performance Standards for Microinsurance

T he Philippine government, through the Insurance Commis-

sion (IC), issued in 2010 the policy fiber for microinsurance

regulation in the form of the Regulatory Framework for Mi-

croinsurance. This framework stated the the government’s

intention to encourage the increased participation of the private sector

in the delivery of microinsurance products and services.

Attendant to this encouragement of private sector participation is

the government’s recognition of its responsibility to ensure the viable

and sustainable conduct of a flourishing microinsurance industry. As

a result, the performance standards for microinsurance were estab-

lished.

Performance standards are a set of benchmarks used to assess

and evaluate the operations of all microinsurance providers. Adopted

by the commission in 2011, performance quality is to be determined

based on financial statements to be furnished by insurance companies, cooperative insurance societies and mu-

tual benefit associations.

Come April 2012, the application of performance standards will be in full swing. In preparation for this, the

Insurance Commission, Department of Finance – National Credit Council, Asian Development Bank-Japan Fund

for Poverty Reduction, and GIZ-MIPSS initiated the Performance Standards Training for regulators at the tail-

end of October.

Trainings will also be held through December for representatives of life insurance companies, non-life insur-

ance companies and mutual benefit associations.

The set of performance standards includes the areas of Solvency and stability, Efficiency, Governance, Un-

derstanding of the product by the client, Risk-based capital and Outreach (SEGURO). GIZ-MIPSS, through dia-

logue with Access to Insurance Initiative (A2ii) will likewise collaborate with the World Bank’s FIRST Initiative in

supporting the Insurance Commission on monitoring and reporting of the performance standards outcomes.



Microinsurance Resource Center (MiRC) to Capacitate Future MI Agents

The Insurance Commissioner is flanked by MIPSS and MiRC representatives at the Butuan leg of the Advocacy Seminar on Microinsurance.

T he Mindanao-based Microinsurance Resource Center (MiRC) was recently accredited by the Insurance

Commission as a training institution for future microinsurance agents. The national regulatory agency,

in promoting the microinsurance industry, relaxed the prevailing requirements for licensure by exempt-

ing microincurance agent-applicants from the regular licensure examinations. The applicants can in-

stead undergo a microinsurance training course and pass the qualifying examination at the end of the course.

Positioning itself as an advocate of microinsurance in Mindanao, with particular emphasis in the Caraga region,

MiRC designed the Microinsurance Agents’ Training Program (MATP) which is structured based on the pre-

scribed course from the Insurance Commission.

Complementing this capacity-building initiative, MiRC has also been supporting the successfully concluded Fi-

nancial Literacy Roadshow on Microinsurance Advocacy in the Eastern Visayas and the Caraga regions. MiRC

is a joint undertaking of the Father Saturnino Urios University (FSUU) and GIZ-MIPSS.

First Payout Released for Natural Catastrophe (NatCat) Insurance

T he recently concluded First Central Visayas

Cooperative Congress served not only to kick

-off the International Year of Cooperatives in

2012. It was also the venue for highlighting

that insurance against natural catastrophe pays off.

The first Weather Protect insurance product payout

was awarded to the Mactan Island Multi-Purpose Coop-

erative (MMPC) to benefit its members affected by ty-

phoon Ramon which ravaged the country in early Octo-

ber.

Receiving a total payout of PhP100,000, this claim

payment will be used to ensure that the cooperative’s

more than 5,000 members have a reliable and stable

financing source as they recover from the effects of the

typhoon.

The Weather Protect product is an innovative off-

shoot of the collaboration among GIZ-MIPSS, Munich

Re and CLIMBS Life and General Insurance Coopera-

tive. Handing out the claim settlement was Ms. Sylvia

Quinesio, CLIMBS Regional Marketing Manager for

Visayas.


W hen natural catastrophe happens, the

earning capacities of borrowers are usu-

ally affected, resulting in loan defaults.

This affects the quality of the loan portfo-

lio of lending institutions. To address this, a natural ca-

tastrophe (NatCat) insurance product has been devel-

oped under a public-private sector partnership between

GIZ-MIPSS and Munich Re. The Weather Protect Prod-

uct was specifically designed for the primary coopera-

tive member-investors of CLIMBS Life and General

Insurance Cooperative, a secondary insurance coop-

erative and a licensed composite insurance company.

Weather Protect Product provides insurance cover

to the loan portfolio of a primary cooperative should an

extreme weather condition happen. Insurance claims

are paid when wind-speed or rainfall exceeds the pre-

defined trigger in the area where the member-

borrowers of the cooperative resides.

The objective of this NatCat product to protect the

cooperative as an institution is clear. The next step in

ensuring the product’s effectiveness is then to define

how its protection is extended to the individual mem-

bers of the cooperative. GIZ-MIPSS recently commis-

sioned a study to document and evaluate the mecha-

nisms and strategies that can be employed in the future

to share the benefits of the Weather Protect Product to

member-borrowers.

Five strategies were proposed, as possible ways of

trickling the natural catastrophe insurance benefit to

borrower-members. Of this, the fifth strategy is consid-

ered the most efficient and will be valuable to GIZ-

MIPSS’s continued innovation for microinsurance

against natural catastrophe.


Sharing the Benefits of Natural Catastrophe Insurance from the Cooperative to Borrower-Members

1

1 Excerpt from the study conducted by Dr. Ma. Piedad Geron

STRATEGY ADVANTAGE DISADVANTAGE Claims collected are credited to a fund that is used to provide welfare bene-fits to members.

With clear coop policy and guidelines on member’s benefits, all members are given equal access to the claims

collections through the various bene-fits available for members

Claims from natcat may not necessar-ily be used to provide protection to members in the event of a peril cov-

ered by natcat

Claims collected are used to open a lending window to provide calamity loans at zero or relatively lower inter-est rates

Cash flows in times of calamity are augmented;

Members not affected by the calamity effectively subsidize members who

are affected by the calamity, up-holding the cooperative principle

Members not really affected by the calamity may borrow just to avail of

the low interest loan.

Claims are used to pay for the loan amortization of members during peri-ods of catastrophe. All members af-fected by the calamity are given an amortization holiday for a definite number of installments.

Provides members with a reprieve on

loan amortization; Allows members to adjust their cash

flow

Credit discipline of borrowers may be

affected Coop members may be prompted to

avail of the amortization holiday even if they are not affected by the calam-

ity. Loans of members with past due status caused by natural catastrophe damage are restructured. Claim pay-outs are considered part of the coop’s loanable funds.

Provides time for coop member to recover without having his/her loan

on past due status; Maintains the health of the coop’s

loan portfolio

Difficult to determine if past due status is due to calamity. There is a huge incentive for members to self-select and opt for restructuring.

Claim payouts are co-mingled with the cooperative’s operations funds. Bene-fits from the insurance claims are con-sidered to trickle down to the mem-bers through the dividends arising from the net surplus.

Easy to administer; All members get access to the benefits

arising from the claims; Benefits accrue to the coop as an insti-tution. The Board of Directors and the management body are given the lee-way to decide the necessary benefits

that the coop should provide its mem-bers.

Benefits from claims may be dissi-pated by inefficiencies of manage-

ment.



T he potential of microinsurance to lift the poor

out of the vicious poverty cycle has garnered

universal recognition. In developing countries

such as Ghana and the Philippines, GIZ has

propped up microinsurance as a helping hand to the

poor since 2009. Having achieved significant gains in

microinsurance promotion, GIZ-Microinsurance Innova-

tions Program for Social Security (MIPSS) and GIZ

Ghana projects in Promoting Microinsurance in Ghana

(ProMiGH) and the Innovative Insurance Products for

the Adaptation to Climate Change (IIPACC) are cur-

rently exchanging experiences and lessons from their

respective initiatives.

Ghana and the Philippines have many things in

common in terms of promoting financial risk protection

for the poor. These include enhancing regulatory frame-

work, insurance awareness, capacity-building of the

industry, among others. GIZ-MIPSS has presented to

the National Insurance Commission (NIC) about Micro-

insurance initiatives in the Philippines. The Insurance

Commissioner herself, Mrs. Nyamikeh Kyiamah, and

other NIC officers showed enthusiasm to what they

learned.

ProMiGH has a strong partnership with NIC and

with other microinsurance stakeholders in the country.

The support of ProMiGH to the on-going drafting of a

bill to enhance the insurance regulatory regime is cru-

cial. Once this process is successfully completed, it will

pave the way to enormous opportunities for microinsur-

ance market development.

The urgency of microinsurance provision for farm-

ers is one nugget of wisdom embodied in both MIPSS

and IIPACC. MIPSS has collaborated with the Euro-

pean Union-funded Enhancement of Food Security in

the Visayas Project (EFOS) to pilot-test the Area-Based

Yield Index Insurance (ARBY), which seeks to help out

rice farmers. IIPACC, on the other hand, cooperates

with GIZ partners such as NIC and the Ghana Insur-

ance Association in the implementation of the Drought

Index Insurance for maize farmers.

Part of the ongoing lesson-exchange was an expe-

riential trip to the regions of Brong Ahafo, Ashanti and

Eastern, facilitated by the team of IIPACC. The experi-

ence in the countryside and the interactions with rural

bankers and leaders of the ARB Apex bank were en-

couraging. Like in the Philippines, rural bankers always

ask practical and straight-forward questions. Feedback

from the bankers was resounding that agriculture loan

portfolio is not only challenged by weather perils but

also by other risks.

At the heart of each of these programs is the under-

scored significance of public-private partnerships.

MIPSS and the GIZ projects in Ghana such as

ProMiGH and IIPACC have facilitated the platform on

which all stakeholders of the insurance industry can

work together towards financial inclusion and social

protection.

GIZ Microinsurance Programs in the Philippines and Ghana Exchange Lessons

By Dante Portula

Mr. Dante O. Portula, Senior Finance Adviser of GIZ-MIPSS trading stories from the Philippines with Ghana’s National Insurance Commissioner Nyamikeh Kyiamah, NIC officers and colleagues from GIZ PSED and ProMiGH


MIPSS Program Manager: Dr. Antonis Malagardis Phone: +63 2 353 1044-45 Fax: +63 2 353 1043 Email: [email protected] Web: www.microinsurance.ph Contributors: Diana Almoro, Dante Portula, Jimmy Loro, Rino Asuncion, Avelino Filio, Amie Cervales, Antonis Malagardis Printed by: Winks Marketing, Manila, November 2011

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