Leading re/insurance firms launch microinsurance initiative at Davos

A consortium of leading insurance and reinsurance underwriting and broking firms have launched a micro insurance consortium and micro insurance venture incubator (MVI) at the World Economic Forum event in Davos, Switzerland today.

Participants in the consortium are all leading lights in the insurance and reinsurance sector. Backing it are American International Group, Inc., Aspen Insurance Holdings Limited, Catlin Group Limited LLC, Guy Carpenter & Company, LLC together with Marsh & McLennan Companies, Inc., Hamilton Insurance Group, Ltd., Transatlantic Reinsurance Company, X.L. Group, plc, and Zurich Insurance Group.

The microinsurance space is seen as both a potential driver of growth as well as a way to provide insurance products to the world’s poorest, which in turn can help to drive penetration of cover into regions where it has been lagging.

The use of index insurance, weather linked covers and parametric triggers feature in many microinsurance programs, with the predictive nature of these structures providing a source of risk financing that can be readily understood and that responds to the clients needs.

A focus on innovation and product design could drive the micro sector forwards, thus increasing global insurance penetration and alleviating some of the financial pressures felt in emerging regions of the world.

As such the MVI provides both opportunity for the participants and consortium as well as a valuable social service which is much needed. It also demonstrates the innovative thinking that may be required from incumbent players in the current softening re/insurance market environment.

The MVI aims to launch ten microinsurance ventures over the next ten years that will deliver solutions to address the risk management needs of the underserved.

At its core, the MVI is a Bermuda-based entity which has been formed with the specific purpose to create markets that deliver insurance or risk protection to the underserved in developing countries of the world.

The MVI says that it will “innovate technology-enabled platforms, achieve sustainability through adequate levels of profitability and advance the role of insurance in society,” noble goals and also a potential avenue of growth and profit for participants in a challenging market.

Currently the MVI is evaluating opportunities in Latin America, Africa and emerging Asia, and aims to have the initial venture launched in 2015. Joan Lamm-Tennant, Global Chief Economist and Risk Strategist, Guy Carpenter, has been appointed as the MVI’s CEO and will be based in New York.

The strategy and operational model for the MVI comes from a shared vision amongst its consortium of the importance of microinsurance in emerging markets and a collaborative approach to innovation that benefits the marketplace and the industry.

The MVI will serve as an innovation incubator to support the launch and operations of a portfolio of microinsurance ventures worldwide. The ventures that will be launched under the MVI will be expected to bring certain unique qualities, such as unique distribution methods, local partnerships, product development and impact services such as measuring/monitoring social impact, all of which will help new ventures to achieve scale and profitability in what can be a challenging market.

Some further detail on the initiative and structure of the MVI itself:

The MVI is a Bermuda-based entity formed to create markets that deliver risk protection to the underserved in developing countries by:

• Providing turn-key, cost-effective service ventures through collaborative innovation
• Creating active and profitable markets for multiple microinsurance products & services, in multiple geographic locations
• Benefiting the global “emerging consumer” segment (first generation insurance customers)
• Contributing toward solving societal problems (e.g. economic continuity, health, longevity, food security)

The MVI will comprise of a holding company and ventures/service entities and will operate as follows:
Operating Company (MVI)
– For-profit legal entity serving as a HoldCo for the ventures; owned and funded by the Consortium Members; initial ownership in equal shares
– Responsible for developing, designing, launching and managing microinsurance ventures
– Manages relationships with Consortium Members, third party carriers, venture partners, donors, academics, governmental bodies and other relevant parties
– Creates replicable intellectual property and other expertise to be applied across ventures (e.g., distribution platforms, product design, data and analytics, technology, social impact metrics)
– Led by dedicated three-person management team, including a CEO reporting to MVI Board
– Responsible for developing social impact metrics and monitoring social impact effectiveness of the ventures (through use of partnerships with academic institutions or otherwise)

Ventures (Service Entities)
– Program administration vehicles or other insurance services providers that are seeded or otherwise invested in by MVI in partnership with local third party partners
– MVI may own a majority or minority of equity interests in ventures; structural flexibility is important. Local third party partners that are key to success could also be part-owners of ventures (e.g., local carriers, distribution partners, TPAs)
– Program administration ventures would be responsible for product design, distribution, policy issuance, claims settlement and other necessary services (either directly or through partnerships)
– Each venture will leverage support and learnings from MVI, Consortium Members and other ventures
– Risk capital to support insurance products of ventures may be provided by Consortium Members, local third party carriers or donor entities
– Donor capital could support development of new products or programs through testing and data gathering phases

Various consortium participants provided the following quotes:

Alexander Moczarski, President and CEO of Guy Carpenter and Chairman of Marsh & McLennan Companies International:

“The ability to manage and finance risk is important to the development of a society. As an industry, we have a responsibility to be socially relevant. The gap between economic and insured losses continues to be an impediment to the emergence of societies. The establishment of the MVI demonstrates our commitment to advance the relevance of insurance in society by addressing the risk needs of the underserved.”

Daniel S. Glaser, President & CEO of Marsh & McLennan Companies:

“Increasingly, the growth of our industry is tied to innovation and the positive impact we make on society. The MVI applies our collective expertise and intellectual capital to help millions of people around the world. On behalf of our 56,000 colleagues, Marsh & McLennan is proud to be a founding partner of MVI.”

Michael S. McGavick, CEO of XL Group plc:

“In many regions of the world, opportunities to better oneself and one’s community come more slowly and with devastating risks because the resilience created by the insurance sector is not available. This must change, and I am terribly proud that this consortium have come together to do something about it.”

Michael Kerner, CEO General Insurance, Zurich Insurance Group:

“Our shared expectation is that by enabling product, distribution and operational innovation we will help create the efficiencies and knowledge necessary to make micro-insurance a vibrant sustainable market. When successful, it will help bring the benefits of modern risk management to millions of first-time insurance buyers.”

Kevin Hogan, Chief Executive Officer, AIG Consumer Insurance:

“We have invested in a number of microinsurance initiatives in various countries and are eager to expand our reach through the promising work of this consortium. Microinsurance is not only a viable business, but one that presents a unique opportunity to serve individuals and small businesses who do not typically have access to our world class products and services. Partnering with our industry peers allows us to leverage our global reach, better mitigate risks, successfully reach more individuals and make an even more meaningful impact on communities and people around the world.”

Mario P. Vitale, CEO, Aspen Insurance and President Aspen U.S. Insurance:

“With a structure designed to serve as an innovation incubator, the MVI will attract and engage young talent. Both Aspen and the millennial generation highly value innovation and creative approaches to solving problems, and this consortium will clearly resonate with that generation. This is a really important endeavor which I fully support and we look forward to contributing to its success.”

Paul Jardine, Chief Operating Officer, Catlin Group, Limited:

“We at Catlin are excited to participate in the MVI, which brings together a broad spectrum of companies of all shapes and sizes within the insurance industry. I believe that the MVI will not only benefit potential clients in emerging markets, but also will provide the MVI’s participants with essential knowledge about markets which are currently under-served by our industry.”

Michael C. Sapnar, President and CEO, Transatlantic Reinsurance Company:

“This venture is about empowering local communities. By working together, we will be able to create a better solution than any one of us would be able to offer on our own. Each of us brings our own diverse experiences and skills: collectively we will be able to offer a more resilient, more effective insurance protection to currently underserved communities worldwide.”

Brian Duperreault, CEO, Hamilton Insurance Group:

“Innovative research and development enabled by the MVI will make affordable insurance products accessible to millions in the developing world. Greatly reducing the cost of distribution on a global scale through reverse innovation could be one the most enduring legacies of this project.”

Joan Lamm-Tennant, Global Chief Economist and Risk Strategist, Guy Carpenter and MVI CEO-elect:

“Endeavors of this scope and ambition would not be possible without the support and vision of our founding leaders. Our differentiated strategy is to learn and respond to the risk needs of the underserved. By forging strategic alliances with entities that have direct and trusted relationships, we will understand the needs of the customer, and subsequently identify specific ventures and solutions accordingly. I am excited about this unique business model. It has been designed to allow for the long term focus needed to balance profitability with social impact. Collaborative ownership enables the MVI to access the vast and specialized knowledge and resources of founding firms to the benefit of the underserved.”