As many as eighty cooperatives in the Philippines are said to be considering a microinsurance product (our previous coverage here) designed to protect them from the impact to their loan portfolios caused by natural disasters and extreme weather involving wind and rainfall.
The product is being marketed by Philippine cooperative insurance company Coop Life Insurance & Mutual Benefit Services (CLIMBS) who has teamed up with Munich Re and Deutsche Gesellschaft für Technische Zusammenarbeit GmbH (GTZ) for this microinsurance venture.
Cooperatives in the Philippines suffer when their members become unable to repay their loans due to losses caused by an extreme weather event. This microinsurance product, CLIMBS Weather Protect, is designed to protect the cooperatives by guaranteeing their loan portfolios through a parametric payout triggered by actual weather conditions. CLIMBS acts as primary insurer with Munich Re the reinsurer.
A unique set of weather indices has been created for each of the 1,700 municipalities of the Philippines to account for the different weather patterns created by the geography of the country. If a storm exceeds the predefined weather index trigger point for a municipality then the cooperatives will receive a payout. If the measured wind speed or amount of rainfall caused by a single event is the highest recorded in 10 – 15 years, the cooperative will receive a payout equal to 5% of its loan portfolio. If the recorded weather measurements are the highest in 15 – 20 years they receive 10%, and in 20 years or over they receive 20%.
To ensure the end users, or members of the cooperatives, benefit from a payout each cooperative has to set up a catastrophe fund which will offer interest free emergency loans to its members after a qualifying event.
CLIMBS have been marketing the product to as many as 1,600 cooperatives in the country and they expect eighty to take advantage of the product this year.