Reinsurer Swiss Re and it’s member colleagues of the Microinsurance Catastrophe Risk Organisation (MiCRO) are to develop a parametric microinsurance policy aimed at women entrepreneurs in Haiti. The scheme will offer a way to enable Haitian women struck by cholera with a rapid insurance payment for income lost by their businesses due to their illness. As with other microinsurance schemes the overarching aim is to prevent people’s businesses from failing and their micro-loans from defaulting.
The parametric nature of the cholera insurance policy enables rapid payout based on measurable factors which trigger the policies. These factors include cholera-related hospital admission numbers and weather conditions known to result in cholera outbreaks (such as heavy rainfall).
There is an underlying index which is specially developed to mirror actual local conditions as closely as possible. Swiss Re say this is efficient as it can allow for payment even before cholera sufferers receive medical treatment.
The scheme will be opened to Haiti microfinance organisation Fonkoze’s women borrowers, of which there are 50,000, and aims to be fully rolled out by 2013. Swiss Re will begin designing the policy next month and aims to have a pilot test running in early 2012.
MiCRO also offer, with the help of Swiss Re, a natural disaster insurance policy which is triggered using parametric factors. “Some 4,000 women who lost their homes or business assets in the floods earlier this year have already received USD 1 million in payment We expect this cholera policy will be similarly effective in ensuring that the infection of an income provider does not result in destitution for the entire family,” said Swiss Re’s Chairman of Global Partnerships Michel Liès. “We also anticipate that the index we develop for MiCRO can potentially be applied to other infectious diseases in other parts of the world.”
What is fascinating about this product is the use of hospital admissions as a parametric factor in the index used to trigger this insurance product. Could similar factors be used to trigger larger insurance-linked security type securitizations of specific health risks for life and health insurers in the future?
You can read our previous coverage of MiCRO here.