The Microinsurance Catastrophe Risk Organisation (MiCRO), a reinsurance company established in Barbados and founded by Fonkoze and Mercy Corps with the support of Swiss Re, has launched a new parametric insurance product in El Salvador that is designed to provide business interruption coverage.
The new product, named Produce Seguro in El Salvador, is a parametric product based on indices of data related to weather and catastrophe events, designed to protect low-income families against natural disasters.
The parametric insurance from MiCRO covers business interruption losses from excessive rainfall, severe drought and earthquakes. It is similar to a product piloted in Guatemala last year that has now been launched nationwide, and MiCRO plans to expand this offering to three additional countries in the next two years, the first being Colombia.
“After having launched a similar product in Guatemala last year, this product launch in El Salvador shows that MiCRO’s solution, the first one offering protection against natural disasters to those who need it most, is replicable, a critical factor to scale up and be able to offer this innovative product sustainably,” explained Carlos Boelsterli, CEO for MiCRO.
“We are working closely with financial institutions and insurers in the region to develop commercially sustainable products that are appropriate and affordable for farmers and small businesses,” added Steve Mitchell, Chairman of the Board for MiCRO. “Anyone who may be affected by a catastrophic weather or earthquake event will be able to get the insurance protection they need from a reliable source.”
The parametric policy, which was designed by MiCRO and is provided through local partners Banco de Fomento Agropecuario and Seguros Futuro, can be triggered automatically by predefined catastrophe and weather events which have been verified by objective data sources, including NASA satellites.
The more impactful the event, the greater the payout to the policyholders will be. Policyholders are also set to be given disaster risk reduction training through national coordinating bodies, which will ultimately help to increase their resilience to disasters.
This is the first index-based, catastrophe insurance specifically for low-income individuals in El Salvador. Given the importance of agriculture and small businesses, as well as the threats posed by climate change, the economy of the country and the success of its people is inextricably linked to such disasters.
Reinsurance firm Swiss Re provided technical assistance and risk capacity which MiCRO said has been instrumental in providing this new parametric insurance product.
MiCRO intends to roll-out this product through local partners across the region over time, which will require increasing amounts of risk capacity to back it from reinsurance providers and perhaps even the capital markets in time.
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