While attention is focused on the damage caused by hurricane Isaac when it ploughed into the Louisiana coastline it is easy to forget that before Isaac reached the U.S. the storm caused extensive damage in the Caribbean. The worst affected island appears to have been Haiti, which Isaac struck while a strong tropical storm bringing torrential rains and damaging winds.
The storm has been sufficiently damaging on Haiti to cause the microfinance organisation Fonkoze to announce that they would be paying out on the Microinsurance Catastrophe Risk Organization (MiCRO) backed disaster insurance policies that they provide along with their loans.
In an update sent out on the 24th of August, Fonkoze told its policyholders that thanks to Kore W, their microinsurance program that covers all Fonkoze’s lending clients, they are ready to give all clients in areas hit by intense rain and wind a $125 payout, forgive their existing loan balance, and give them a new loan when they require it.
The Fonkoze microinsurance program is a great example of disaster insurance being taken down to a level where it can help the poorest people get back on their feet after a disaster strikes. The policies are part of the loan agreement that women could take out with the microfinance organisation and payout based on weather conditions.
The Fonkoze policies are backed by MiCRO, an organisation established to provide 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.
MiCRO policies are parametric in nature, using a parametric trigger to settle claims after specific catastrophes including rainfall, wind and earthquakes. We haven’t yet heard officially that MiCRO has been triggered, but considering that Fonkoze believes its policies to have been triggered it seems almost certain that the MiCRO policies underlying the Kore W product will have to payout to back up Fonkoze’s clients claims. MiCRO themselves are reinsured via Swiss Re.
Tyler Tappendorf, project manager for Fonkoze’s microinsurance program, said that their preliminary calculations indicate that tropical storm Isaac’s wind speeds exceeded the parametric trigger when it hit Haiti at the weekend. This should prompt a payout from Swiss Re to the MiCRO organisation under the terms of their parametric reinsurance policy, but even if it doesn’t breach the trigger point Fonkoze clients are still entitled to claim on their Kore W policy if their home or businesses suffered significant damage. 22 of Fonkoze’s 46 branches across Haiti have reported damage to their clients properties and businesses.
Last year Fonkoze paid out over $1m after heavy rainfall triggered the MiCRO facility, allowing their clients to recover much more quickly from the disaster.
These microinsurance facilities for disaster insurance look set to play a growing role in the developing nations of the world. Parametric triggers are proving an invaluable way to provide prompt payouts to people who would otherwise have no financial support to recover from weather. climate or geological disasters.
Separately, the Caribbean Catastrophe Risk Insurance Facility (CCRIF) has reported that it does not expect tropical storm Isaac to trigger any of its members parametric policies. They have assessed the impact of Isaac for Haiti, the Bahamas and Dominica. They said; “Preliminary runs of the CCRIF loss model generated only small government losses in the affected countries, which in all cases were below each country’s trigger level and therefore no payout is due.”
We’ll update you if we hear anymore about Isaac’s impacts to MiCRO.