A man holds up a painting

A man holds up a painting about the earthquake at a street side art market in Petionville, Haiti

Partnership = community

Microfinance helps poor people build a better future – but what if disaster strikes? MiCRO throws a lifeline to women in Haiti.

In the midst of the rebuilding efforts that followed the devastating earthquake in Haiti, the country was struck by floods in June 2011. Josette Lazzare recalls: “We were eight women who lost all our goods in the floods – in some cases our homes. If we hadn’t had insurance, we’d still be sitting around with our chins in our hands!”

Poverty is expensive: raising the money for goods to sell, especially for the medical treatments that Josette offers, can be almost impossible for those without credit. Fortunately for Josette, her husband encouraged her to join Fonkoze, a microfinance organisation, just before Haiti’s devastating earthquake in 2010 – an earthquake that killed him, leaving her with three children.

Fonkoze gives Haiti’s women a stepladder to climb out of the poverty trap: a long-term, multi-stage combination of training, lending and mutual support to build self-sufficient, productive lives. Today the organisation employs 900 people and serves more t han 58,000 loan clients and 255,000 savers, most of them rural. It brings, not just finance, but the beginnings of economic organisation to one of the poorest nations on earth. For Josette, who trained as a nurse, it let her expand her business into health-care products with a loan of USD 250.

Josette Lazzare
Left:

Josette Lazzare, who benefited from microfinance organisation Fonkoze,at her home aboveLes Cayes, Haiti

But Haiti is not just poor – it is the victim of a succession of natural catastrophes. Anne Hastings, Fonkoze’s CEO, explains: “We got tired of seeing our clients’ lives and livelihoods being wrecked time after time by a seemingly never-ending slew of disasters. The Haitians are very resilient, but at some point we realised that it doesn’t make sense to keep helping them build assets, unless we can also help them protect what they have built up.”

While insurance cannot prevent catastrophes, it is a critical part of any solution to help alleviate the impact of these tragedies, allowing communities to rebuild with more speed and resiliency. This was the starting point for collaboration between Fonkoze, Swiss Re, Mercy Corps, the UK government, and private sector partners, who jointly created the Microinsurance Catastrophe Risk Organisation (MiCRO) in March 2011.

Structured by Swiss Re, MiCRO’s policies give microfinance clients protection against specific natural catastrophes. Fonkoze then distributes the compensation using the same cooperative structures through which it lends. After the floods in June 2011, more than USD 1 million was paid out to 3,800 clients; most of the money was distributed within 60 days.

Private solutions for public risks

Societies are becoming more vulnerable as risks become more complex. Only a small proportion of economic loss is currently insured. Society – individuals, companies, governments – must pay for the rest. Swiss Re Global Partnerships enables a new approach to risk management by bringing the expertise, techniques, and capacity of the private re/insurance industry to the service of the public sector.

In a further innovation, Swiss Re is developing a parametric index that lets MiCRO insure clients like Josette against another scourge in Haiti: cholera. Infection of the income provider can mean destitution for an entire family, but MiCRO’s income-loss protection could help prevent a medical emergency from turning into an economic disaster. “Catastrophes mean not just natural disasters but other severe and unexpected events that adversely affect society. Microinsurance is vital where there is high exposure to catastrophes and limited funds to recover quickly,” says Nikhil Da Victoria Lobo, Senior Vice President at Swiss Re, who was closely involved in developing MiCRO. “We believe the MiCRO model can be scaled up and used throughout the developing world.”

Back in Haiti, Josette Lazarre agrees: “I wish I could personally encourage every single one of my colleagues in the market to sign up for it. My husband died in the earthquake, and now that he is gone, Fonkoze and MiCRO have become my security and protector. I feel at peace knowing that.”

The view from CGI

President Bill Clinton

President Bill Clinton Founding Chairman, Clinton Global Initiative; 42nd President of the United States

Swiss Re is a strategic partner to several important global conferences, including the Clinton Global Initiative (CGI). CGI focuses on concrete action, securing many commitments from its partners every year and helping to drive development throughout the world.

One commitment, announced in 2011 by Swiss Re in partnership with Fonkoze and Mercy Corps, is the planned development of parametric cholera coverage for women entrepreneurs in Haiti, building on existing disaster risk coverage through MiCRO. This first-of-its-kind concept is a swift response to the recent outbreak of the disease following the 2010 earthquake.

Former President of the United States Bill Clinton, CGI’s Founding Chairman, maintains a deep personal engagement in the future of Haiti. He said: “The Haitian people and the government are working hard to build their country up; CGI members’ support is critical to their efforts.”

Building tomorrow’s insurance markets

More than USD 1 trillion was lost in natural disasters over the last ten years – in rich countries like Japan and poor ones like Haiti – with severe social, economic and political consequences. Swiss Re Global Partnerships works with the public sector in many countries to develop new ways to address these challenges. Before becoming Swiss Re's Group CEO as of 1 February 2012, Michel M. Liès was Chairman of Global Partnerships.

Michel M. Liès, how would you describe what Global Partnerships does?

Global Partnerships helps government and development organisations design and implement risk financing strategies to narrow the gap between insured and economic losses. When disaster strikes, it is often the people and communities who can least afford it that are most affected. We explore new ways of easing the burden on the public sector; at the same time, we design insurance solutions that can help the poorest people recover faster from disaster and avoid the poverty trap. This top-down plus bottom-up approach is very effective.

Global Partnerships deals with governments and NGOs. What are the challenges?

It’s surprising how underestimated insurance and reinsurance solutions are at public level: few people are aware of their role for economic growth and stability. Government representatives have little idea of the benefits insurance-based risk solutions can bring. It’s our ambition to ensure that political leaders routinely consider insurance as an option for mitigating the risks faced by their countries.

How does the message get across?

Convincing our partners on the concept is almost the easiest part of the job: making things happen takes more time and that’s where Global Partnerships is focusing at the moment. Fortunately, there are some compelling success stories. On the macro-side, there is the Multicat bond developed with the World Bank for Mexico, where Swiss Re transferred storm and earthquake risk to the capital markets to allow swift payouts. On the micro-side, the team is working with development and microfinance organisations to offer affordable insurance to those who do not yet have access to the formal economy.

Would you say Global Partnerships is business or philanthropy?

Global Partnerships has a clear business mandate to build an entirely new market. Swiss Re provides tailored solutions for advanced as well as emerging markets – and there is a lot of cross-fertilisation there. We also have an edge in that we work at both the countrywide, or macro level, and the individual, micro level. I hope that our actions will speak louder than words, and that insurance will be recognised for its real contribution to societies’ relief and resilience after disasters.

Michel M. Liès

Michel M. Liès Swiss Re Group CEO and former Chairman Global Partnerships

“We explore new ways of easing the burden on the public sector; at the same time, we design insurance solutions that can help the poorest people recover faster from disaster and avoid the poverty trap.”

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