Munich Re Launches Its First Microinsurance Product for Cooperatives in the Philippines

October 11, 2010 by Microfinance Africa
Filed under MICROFINANCE AROUND THE WORLD

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By Iris Lai, Insurancenewsnet.com -

Munich Re has rolled out its first microinsurance product in the Philippines to provide protection for the lending capacity of cooperatives to low-income groups against extreme weather events.

The loan protection microinsurance product was developed for Coop Life Insurance & Mutual Services, a cooperative life insurer for local cooperatives and members in the Philippines, in partnership with Deutsche Gesellschaft fur Technische Zusammenarbeit, a German government-owned enterprise for international sustainable development projects.

Munich Re is the sole reinsurer for this microinsurance product, distributed through more than 1,800 cooperatives in the Philippines. Coop Life is the composite insurance provider for cooperatives with products offered for life, property and health protection. It is also the primary insurer for local cooperatives and offers them portfolio protection.

The product will enable low-income households in the Philippines to receive benefits through their cooperative after devastating natural events. For the cooperatives, the microinsurance plan will guarantee liquidity of the loan portfolio and will provide quick payout via Coop Life, said Munich Re in a statement.

Munich Re is also looking into development of other new microinsurance products in the Philippines, said Thomas Mahl, business development manager at Munich Re Singapore. The partnership with GTZ is important to promote social responsibility for catastrophe protection in delivering benefits to the target group, he said.

The Philippines is highly exposed to extreme weather events such as typhoons, torrential rain and subsequent floods, creating financial risks to microfinancial institutions. Typhoon Morakot was among the top 10 largest global natural catastrophe in 2009, causing 614 deaths, US$1.6 billion in economic losses and US$110 million in insured losses, according to Munich Re.

Natural disasters interrupt the cash flow of cooperatives as member borrowers often cannot repay their loans, leading to insolvency of the cooperatives. In the Philippines, the cooperatives currently lend money at a higher interest rate, creating an additional financial burden to the low-income borrower.

The microinsurance product “will help cooperatives to spread the risk, secure their liquidity and enhance their micro-lending capacity even in critical times, at the same time making loans affordable to their members,” said Mahl.

In addition to reinsurance coverage, Munich Re will offer support in satellite data monitoring and analysis. There has been a great demand for catastrophe risk protection in Asia. Mahl said the reinsurer is looking to develop this product in other countries.

As extreme weather events induced by climate changes are likely to increase, Munich Re said microinsurance instruments are expected to gain relevance for affected communities as well as insurers’ portfolio.

The partnership with cooperatives could scale up the microinsurance coverage on a group level across the county, said Mahl. Also, these cooperatives offer extensive distribution and administration supports for product penetration.