Over the last two months, we have shared some of the main discussion points from the MiN’s annual member’s three-day meeting in June. The focus of this meeting was identifying the challenges the inclusive insurance industry faces when it comes to market penetration - particularly among the communities who would benefit most from it – and how to overcome them. Some of the main barriers are distrust among the target market, lack of data to develop relevant products and concerns around financial viability of these products once they’re created. As was explored during Day 2 of the event (and in the August newsletter), collaboration across the industry can provide solutions to many of these challenges. And we’re already seeing organisations successfully develop insurance products for vulnerable communities through effective partnerships, whether that be with public sector and NGOs, or private sector companies and finance institutions. Those who are working together to develop products that meet the needs of the target market, and who are building trust by paying claims on time, are seeing demand for microinsurance grow. This can only support the long-term viability of the sector.
In this final instalment, we’re going to share the discussions that took place during the final day of the June meeting that featured a joint Microinsurance Network-InFiNe workshop titled “Seizing Opportunities: Advancing Financial Inclusion and Inclusive Insurance in Climate and Disaster Risk Finance”. The workshop focussed on two key areas, highlighted by Laura Rosado of AXA (and Vice Chair of MiN’s Board of Directors). Firstly, the convergence of environmental and social challenges facing low-income communities, and the importance of not developing specific climate-related products in isolation from other critical risks faced by low-income households. Second, exploring climate resilience beyond insurance, for example through micro, meso and macro financial instruments.
Highlighting inclusive finance’s role in climate resilience
In addition to the opening from Laura Rosado, both Anne Bastin Executive Director of InFiNe and Paul Weber, a diplomat at the Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, responsible for Luxembourg's Development Cooperation in inclusive and innovative finance and MiN’s Board member talked again about the role that Luxembourg plays in supporting the inclusive insurance industry. For example, InFiNe’s mission as a network is to bring together key stakeholders from the public, private and civil society sectors to support vulnerable populations. The vision of the network is to achieve “affordable financial services for all to contribute to inclusive sustainable development”. InFiNe has two main objectives: promoting the inclusive finance sector and coordinating Luxembourg’s inclusive finance ecosystem to facilitate synergy among network members. They do this in several ways: sharing data, knowledge and best practices about the industry, linking members, coordinating their participation in Luxembourg and international forums, organising workshops and trainings as well as networking events, and co-organising the European Microfinance Platform’s European Microfinance Week. To date, the network includes 43 members from different institutions including civil society, government agencies, investment companies and other organisations working in climate finance. Bastin also highlighted the role the country plays in inclusive finance: it represents 61% of global assets under management in microfinance investment vehicles, and the Luxembourg Sustainable Finance Initiative has raised more than €500bn for green, social and sustainable projects globally.
Paul Weber also highlighted the role of Luxembourg as a hub for inclusive finance and creating a distinctive ecosystem that the government has supported. However, he recognised that to ensure long-term success, the sector needs private sector support. One way to facilitate this is through public-private-partnerships: reciprocal agreements that help both parties involved achieve their own aims together. Taking this on board, Luxembourg has become a centre for all those working in the field of inclusive finance: accelerators, labelling agencies, standard-setting bodies and academia. The hope is that, by creating an environment that enables different parts of the sector to meet and share ideas, promising partnerships will emerge.
Teamwork makes the dream work: Public-private-partnerships drive the sector forward
This idea of collaboration between public and private sector was emphasised during the presentation by Dr. Astrid Zwick, Co-Director of the Global Shield Secretariat. The Global Shield against Climate Risks is an initiative that aims to provide a more systematic and coherent approach to financial protection against climate-related disasters. It focuses on pre-arranged finance at various levels - from sovereign to individual, with an emphasis on country ownership and local stakeholder involvement to identify and address protection gaps. Among the wide array of pre-arranged finance solutions are instruments such as sovereign risk insurance, contingent loans or agricultural insurance. Linking this initiative to other instruments such as social protection systems could make them even more powerful, e.g. to enable fast disbursement of sovereign insurance payouts to the most vulnerable parts of the population. Importantly, the initiative also encourages the private sector to get involved in developing solutions to financial gaps and to help strengthening local inclusive insurance markets to develop protection at the individual level.
Zwick explained how Global Shield was progressing in Pakistan, where initial steps – including stakeholder engagement and stocktaking - have been taken. To increase financial protection, macro- and micro-level approaches need to be considered simultaneously, the latter creating sustainable markets and getting local communities involved in decision making. The standardised In-Country Process applied in the Global Shield countries develops a comprehensive gap analysis. This ultimately leads to the official request for solutions by the Global Shield country which is handed over to the financing vehicles of the Global Shield for prioritisation and implementation.
Highlighting opportunities for inclusive insurance
The final session of the meeting explored opportunities for the inclusive finance and insurance sectors within the current climate and disaster risk financing conversation. During this discussion, several member organisations from the Microinsurance Network and InFiNe shared their work, not just in microinsurance but in finance more broadly. For example, the DHAN Foundation – an NGO in India with 27 years of eradicating poverty – sees risk management as an essential element of their work. Ahila Devi Subramanian, CEO of People Mutuals at the DHAN Foundation, presented their three main strategies: building social capital by promoting self-help groups as the basic unit, federated into block-level development units; mainstream collaboration with stakeholders across India, especially women; and programmes such as community banking for women, farmer groups for agriculture productivity and various ecosystem-specific initiatives. To achieve this, the organisation emphasises financial literacy, provides diverse insurance products and supports climate resilience and disaster risk reduction. And so far, their approach has been working. In 2023, they distributed millions of policies across life, health, crop and livestock insurance, totalling a premium of USD 390m. In future, they hope to improve insurance literacy, pilot innovative products like weather parametric insurance and expand globally through partnerships and knowledge exchange programs.
Other organisations in developing countries also shared examples of their work. Rio Impact, presented by its Founder & Managing Director Ludwig Liagre, are designing conservation trust funds, national biodiversity funds, national climate funds and are helping with access to global environmental facility funds. And microinsurance provider MiCRO, presented by its CEO and the MiN Board Member Carlos Boelsterli, specialises in offering index-based parametric insurance in Latin America to protect against droughts, excess rain, wind, extreme temperatures and other measurable events.
In Luxembourg, there are also several organisations working to support inclusive finance.
Collaborate to innovate
This year’s MiN member’s meeting highlighted the importance of innovation if the industry is to continue to grow and achieve its goals. Many of the sector’s challenges – building trust, increasing uptake and reaching those in rural areas – can be solved by taking a different approach. Instead of drawing on traditional methods that mainstream insurers use to develop and distribute products, the industry needs to listen to their target market to ensure they are creating relevant products and paying claims in a timely manner. Some of the case studies shared during the meeting show just what an impact this can have.
And to ensure the continuing success of inclusive insurance in supporting vulnerable populations, it’s crucial that all parts of the industry – public sector, private players, NGOs and even the communities themselves – work together to identify protection gaps and develop solutions that help those who need them. This was reinforced through the many examples of successful partnerships that were shared during the meeting.
Above all, this year’s meeting highlighted the need for the industry to advocate for itself on the global stage. Whilst the value of inclusive insurance is clear to us, it is often not recognised beyond our industry. To achieve long-term success, we need to change this. As Lorenzo Chan, Chair of the Board of the MiN and President and CEO of Pioneer Inc., highlighted in his closing remarks, “While our impact speaks volumes, proactive communication is essential. Insurance, though indispensable, often lacks the allure of other topics. We must continue to champion its noble role in safeguarding economic progress and resilience...financial inclusion is fundamental. It ensures that communities can withstand and recover from economic setbacks caused by losses and calamities. Accessible, affordable insurance serves as a crucial buffer against these shocks.”
We would like to take this opportunity to thank everyone who participated in this year’s MiN member’s meeting, in particular those who contributed to the agenda on Day 3: Laura Rosado (AXA), Anne Bastin (InFiNe), Paul Weber (Government of Luxembourg), Dr. Astrid Zwick (Global Shield), Pedro Pinheiro (MiN), Ahila Devi Subramnian (DHAN Foundation), Ludwig Liagre (Rio Impact), Carlos Boelsterli (MiCRO), Stephan Peters (ICFA), María Eugenia Tapia Rojo (Luxembourg Sustainable Finance Initiative), Alejandro Vazquez (LMDF), Francesca Pham (Finance in Motion) and Lorenzo Chan (Pioneer Inc.).
We would also like to extend a special thank you to all members, secretariat team, board members and regional coordinators for their dedication and contributions to the event, and we’re looking forward to ICII which is taking place in Kathmandu in Nepal this October. We hope to see as many of you as possible there.