Page 19 - DDME "The Disaster Forum"

The scope of the micro-insurance solu@on proposed in this model is not prescrip@ve but should at a minimum define:
i.Partners in the provision of the micro-insurance solu@on ii.Types of hazards to be covered by the micro-insurance solu@on iii.Livelihood/social sector ac@vi@es to be insured
iv.Type of coverage
Partners in provision of micro-insurance soluTon
Proposed partners for this model micro-insurance solu@on include:
i.Na@onal governments of CARICOM States/Caribbean Catastrophic Risk Insurance Facility (CCRIF) ii.Interna@onal donor ins@tu@ons
iii.Insurance providers
iv.Social/sectoral support organiza@ons (governmental and non-governmental)
v.Relevant private sector agencies vi.Insured groups
Na#onal Governments/CCRIF: In the absence of access to formal insurance, the Governments of CARICOM States func@ons as the de facto disaster loss insurer of the poor. In that regard, these Governments will con@nue to play a central role in the provision of micro-insurance access for the poor. Low levels of income among the targeted insured groups will not allow access to insurance even at the lowest levels of premium and to a large extent, explains why governments of the CARICOM States are the de facto insurers. To ensure affordability of insurance by the insured groups while at the same @me allowing these groups an opportunity to par@cipate in disaster risk transfer for livelihood con@nuity and sustainability, the model proposes that Governments provide some level of premium offset contribu@on so as to bring insurance within reach of the financial capability of the targeted groups. That offset contribu@on would be a percentage of the total cost of premium. CARICOM States are already engaged with the CCRIF and as such might be able to nego@ate a mechanism whereby advancements from the CCRIF could be used to bolster premium offset contribu@ons. Whether or not this is possible, any contribu@on by government to subsidize premiums would reduce dependence on government coffers to underwrite cost of recovery and as such, would represent a win- win situa@on.
Interna#onal Donor Ins#tu#ons: Interna@onal donor ins@tu@ons have tradi@onally played an integral role in all phases of the disaster risk management cycle of CARICOM States and as such, will remain crucial to the effec@veness of a micro-insurance solu@on. Like na@onal governments, the interna@onal donor community has been engaged in disaster recovery in CARICOM States. While donor catastrophic support through governments or directly to insured groups is likely to con@nue in the foreseeable future, the level of interven@on at the recovery phase can be scaled back by contribu@on to risk transfer subsidy, allowing greater diversion of aid resources to preparedness, preven@on and mi@ga@on.
Insurance Providers/Insurer: Successful applica@on of parametric insurance in an environment of covariant losses requires payment of premiums from a large number of insured. As such, a compe@@ve insurance landscape would not be prac@cal for CARICOM States as compe@ng insurers would be unlikely to generate the volume of premiums to cover covariant losses. The model therefore proposes that a mechanism be sought to iden@fy a single insurer with requisite capacity and a favourable level of premium. A single insurer is likely to generate the requisite volume of premiums that will facilitate solvency in the face of covariant losses. The insurance provider will agree to a set level of compensa@on for an agreed upon premium based on a parametric trigger such as a hurricane of specified strength or rainfall of a specified intensity.
Social/sectoral Support Organiza#ons: Social and sectoral support organiza@ons can contribute to micro-insurance solu@ons at two level. Social support organiza@ons such as local NGOs/relief agencies such as ADRA and Food for the Poor might not be averse to contribu@ng to subsidiza@on of premiums while con@nuing with normal recovery ac@vi@es. The sugges@on is that this op@on be explored.
The second level of engagement involves sectoral support agencies that are specific to the targeted insured groups. Cost of premiums can be significantly reduced by minimizing administra@ve cost related to conduc@ng business with individuals rather than with groups. Group support organiza@ons such a small farmers associa@on or a fishers
The outlined scope of the model micro-insurance solu@on must of necessity be informed by rigorous feasibility studies in the respec@ve states. The model allows flexibility in applica@on and as such, individual jurisdic@ons would be at liberty to modify any of its components without impac@ng outcomes. The process employed by the Bri@sh Virgin Islands for undertaking this feasibility study can provide guidelines for other states (Spence, 2013).
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