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Hurricane Sandy triggers Fonkoze-MiCRO weather-index microinsurance in Haiti


Hurricane Sandy will likely cause the largest payout to date for the Microinsurance Catastrophe Risk Organisation (MiCRO) in Haiti. The impact of Sandy on Haiti was severe, with around 54 deaths, 18,000+ people displaced and the micro-lending firm Fonkoze suggesting that as many as 12,000 of their customers may be eligible for a payout under the terms of their parametric weather-index based insurance policies which are reinsured by MiCRO.

Sandy caused significant flooding, landslide and also wind damage as it side-swiped Haiti en route towards the U.S. Microfinance and lending firm Fonkoze have announced that they will be making a significant payout on the Microinsurance Catastrophe Risk Organization (MiCRO) backed disaster insurance policies that they provide to their lending customers.

MiCRO will make a payout to Fonkoze, based on parameters from the actual storm weather conditions. That will enable Fonkoze to make a payout of a fixed sum of $125 (5,000 Haitian Gourdes) and to cancel the outstanding loan balances of thousands of female microentrepreneurs who lost their homes or business premises or stock. MiCRO expects the payout to be made to Fonkoze in the next few weeks.

“MiCRO’s reinsurance product – which offers a quick and reliable payout – makes it possible for Fonkoze to help Haitian small business owners rebuild. There is no way we would have the resources to cover such huge losses without MiCRO,” said Anne Hastings, CEO of Fonkoze. “In the absence of insurance, the women we work with would be left destitute and without hope.”

Through MiCRO, Fonkoze provides its members with the catastrophe recovery product Kore W, which microentrepreneurs in Haiti purchase through a partially subsidized premium at the start of each loan cycle. The Kore W product provides payouts, allows cancellation of outstanding loan balances, and offers new loans when members are ready. The Kore W purchasers are women, many of whom earn less than $2 per day selling small goods at local markets, and their homes or inventories have been destroyed or heavily damaged by the storm.

Because of the MiCRO facilities parametric nature, the payouts Fonkoze makes are linked to actual weather conditions and so can be made more quickly than if a claims assessment process was required. The fixed payout is sufficient to enable their customers to get back on their feet and the ability to wipe out old loans and start new ones means that their customers can remain in business.

Fonkoze estimates that as many as 12,000 of their customers may need help after hurricane Sandy. “This has been a devastating disaster with tremendous damages. We anticipate MiCRO will make its largest payout to date – supporting Kore W funds for thousands of women,” said Steve Mitchell, Acting Chairman of the Board of MiCRO and Vice President of Financial Services at Mercy Corps.

MiCRO is a specialty reinsurance company established to provide parametric tropical storm, hurricane and earthquake reinsurance cover to microinsurance schemes. MiCRO was founded by a number of major players in the risk transfer sectors including Swiss Re, Guy Carpenter subsidiary GC Micro Risk SolutionsSM (GC Micro) and Caribbean Risk Managers Limited (CaribRM). Mercy Corps, a global relief and development agency is also a founding partner as well as Fonkoze themselves.

The Fonkoze, MiCRO insurance scheme continues to be one of the best examples of modern reinsurance techniques, such as parametric triggers, being utilised to provide insurance cover in the developing world.

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