P1.1B For Microinsurance

The world’s first microinsurance fund, which is partly owned by billionaire investor George Soros, is looking to invest up to P1.1 billion in the Philippines’ fledgling microinsurance industry through partnerships with local insurance companies, banks, retail stores or telecommunications operators. LeapFrog Investments, which is also partly owned by the World Bank’s International Finance Corp. (IFC), on Monday announced it has raised $110 million from global institutions, which it will invest in the microinsurance sectors in Asia and Africa.

Business Mirror
P1.1B for microinsurance
Written by Erik de la Cruz / Reporter
Tuesday, 30 March 2010 21:34

The world’s first microinsurance fund, which is partly owned by billionaire investor George Soros, is looking to invest up to P1.1 billion in the Philippines’ fledgling microinsurance industry through partnerships with local insurance companies, banks, retail stores or telecommunications operators.

LeapFrog Investments, which is also partly owned by the World Bank’s International Finance Corp. (IFC), on Monday announced it has raised $110 million from global institutions, which it will invest in the microinsurance sectors in Asia and Africa.

The Philippines, along with India, South Africa, Ghana and Kenya, is on its list of priority countries to invest in in trying to get a bigger slice of the underserved global microinsurance market, especially in so-called emerging economies.

“We are tremendously excited by the potential of microinsurance in the Philippines,” said Staphane Chatonsky, the LeapFrog principal who leads the fund’s investments in East Asia.

Chatonsky, in a press briefing in Manila, said the fund was planning to make investments of P250 million to P700 million in each partnership deal with a local entity that must be businesses with “significant” distribution platforms that reach the mass market.

Talks were under way with potential partners and they hope to seal agreements soon, he said. But he declined to identify their possible partners.

The Bangko Sentral ng Pilipinas recently announced that rural, cooperative and thrift banks may now sell microinsurance products. The Insurance Commission has released a set of regulations for selling insurance products that meet the poors’ need for risk protection.

“We are here for the long-term and bring unique expertise,” said Chatonsky. “We will partner with local players and bring to bear resources and our knowledge of global practices to ensure commercial success and impact in supporting the provision of affordable and relevant microinsurance products.”

He said they are attracted to the Philippines because while over 70 percent of the population or more than 65 million people are classified as low-income. They have, however, sufficient resources to buy insurance for their families and enterprises.

He also said the Philippines has a relatively stable macroeconomic environment and “good” potential for growth. The government, he added, has been actively promoting microinsurance as a tool for poverty alleviation through appropriate tax, regulatory frameworks, measures, and incentives.

He also mentioned the existence of multiple distribution channels to reach low-income Filipinos such as banks, retail stores, mobile-phone networks, microfinance institutions, and even churches.

The fund has already made its first investment of over $6 million in AllLife, a South African insurer serving people living with HIV and diabetes.

According to Chatonsky, the global market for microinsurance has potential to absorb 1.5 billion policies as of 2009.

Four global institutions were scheduled to announce in Frankfurt on Monday investments in LeapFrog’s profit-with-purpose program. The World Bank’s IFC committed $20 million while the Soros Economic Development Fund has approved a $7-million investment, according to a press statement released in Manila.

Flagstone Reinsurance, a global reinsurer, will invest $12 million while the biggest investment of $25 million is to be made by KfW Entwicklungsbank and BMZ, the German Federal Ministry for Economic Cooperation and Development.

With these investments, LeapFrog said it is now by far the largest dedicated investor in the microinsurance sector worldwide.