For the past decade, the Microinsurance Catastrophe Risk Organisation - better known as MiCRO - has been helping vulnerable populations in Latin America and the Caribbean to manage risk. CEO Carlos Boelsterli reflects on the challenges and opportunities posed by climate change and COVID-19.
MiN: How has MiCRO evolved?
Carlos Boelsterli: MiCRO was established after the devastating 2010 Haiti earthquake, which underlined the urgent need to strengthen the resilience of low-income and vulnerable populations. We design and implement appealing and affordable index-based natural disaster insurance that directly or indirectly benefits underserved populations. We do this by collaborating with insurers and other local partners who already reach the target population with financial services.
Since 2018 MiCRO has focused on sustainability through scale - for example we launched a product with SBS Seguros in Colombia last year, we have products planned for Guatemala in the second half of 2020, and we are in advanced talks with potential partners in a fourth expansion country.
MiN: How have you reacted to the COVID-19 pandemic?
CB: It’s an opportunity to communicate the importance of risk protection, and highlights the need to promote access to inclusive insurance. COVID-19 exacerbates the challenges already faced by micro-entrepreneurs and low- and middle-income households.
For example, tropical storm Amanda struck during the pandemic, causing significant human and economic losses in El Salvador and Guatemala. The products designed by MiCRO in close collaboration with Seguros Futuro and Aseguradora Rural, and distributed by the BFA and Banrural, helped more than 2000 households recover quickly by triggering fast payouts up to 100 percent of the sum insured in the most affected areas. One of our clients reported that although he had lost 80 percent of his income he was able to stay in business.
The pandemic underlines the wide protection gap among micro, small and medium-sized enterprises (MSMEs) - for example in Colombia, only five percent have any business interruption protection. They need innovative tech solutions such as index-based insurance which reach remote areas and populations, reduce costs and make insurance simpler and more affordable.
MiN: Why did you move from traditional to inclusive insurance?
CB: Before joining MiCRO, I was with Swiss Re for more than two decades. It’s a great company and opened my eyes to a world of opportunities - and reinsurance has never lost its magic for me! However, I became increasingly concerned that traditional insurance was largely absent in the wake of natural catastrophes, was unaffordable and was not helping the most vulnerable. At Swiss Re I participated in several initiatives beyond the traditional limits of insurability - including index-based solutions such as the first Cat Bond issued to protect the Mexican government against earthquakes. When I was asked to join MiCRO I didn’t hesitate - it was a unique opportunity for me to ‘walk the talk’.
There have been more barriers than I anticipated, but I am also satisfied with our achievements to date. My desire to find optimal, commercially viable solutions continues to grow - especially when I witness events such as Amanda, which remind us of the high exposure and vulnerability of our target market to the impacts of climate change.
MiN: What are the main challenges and opportunities in your region?
CB: The protection gap is still too big, especially in the low-income population. We need appropriate products, innovative distribution channels and maximised operational efficiencies, as well as regulatory frameworks which facilitate innovation. However, we now have ideas and opportunities that would have been unimaginable a few years ago, such as digital technology and an understanding that financial inclusion can combat poverty and help mitigate the impacts of climate change.
MiN: Is there a business case for microinsurance?
CB: Microinsurance must generate a reasonable profit in order to ensure long-term sustainability, but the time and investment capital required is very different from traditional products. Large-scale sales are key.
MiN: Can InsurTech create true efficiencies?
CB: Technology allows us to become more commercially viable, not just by creating efficiencies but by designing products to meet the clients’ needs.
MiN: Are insurance companies doing enough to develop emerging markets?
CB: Judging by the growing protection gap - no. That said, companies are increasingly investing in products for underserved populations, and more niche insurers are disrupting the market with greater innovation.
MiN: Does the label ‘micro’ hinder market development?
CB: Since I work for a company named MiCRO, I don’t think I can criticise! However, talking about ‘microinsurance’ can undermine the importance of the issue, while ‘inclusive insurance’ may help promote this under-explored market.
MiN: Is there an insurance gender-gap?
CB: Not in our experience - 54 percent of our clients are women. However, women in other countries may still experience restricted access to formal financial services such as insurance. We constantly look for opportunities to reduce the gender gap and emphasise the important role that women play in achieving more resilient societies.
MiN: Describe your experience of being a MiN member?
CB: MiCRO joined in 2016, because we believe significant progress can only be made by sharing knowledge and experiences. There are limited resources for developing inclusive insurance and we cannot afford to repeat mistakes. The MiN coordinates the exchange of experiences and valuable resources - for example through its Best Practice Groups, conferences, publications - and by promoting microinsurance in the global financial inclusion agenda.
I’m really happy to see the MiN taking a more prominent role in Latin America and the Caribbean through tailored meetings, seminars, Expert Forums and workshops - many of which MiCRO has participated in. That said, the MiN could collect and promote more case studies directly from the field which analyse what works and what doesn’t. We also need more homogeneous, standardised and updated market data. Establishing a dialogue with insurance associations and supervisors would help us better understand inclusive insurance markets and identify solutions to overcome bottlenecks. By enriching each other’s work we can reduce the protection gap for millions of people who are still invisible to the insurance market.