Disaster-focused microinsurance product arrives in El Salvador

The Microinsurance Catastrophe Risk Organisation (MiCRO), a reinsurance company established in Barbados and founded by Fonkoze and Mercy Corps with the support of Swiss Re, has launched a new parametric insurance product in El Salvador providing business interruption coverage and protection for low-income families against natural disasters.

Named Produce Seguro, the product is an index-based insurance product protecting against excessive rainfall, severe drought and earthquakes.

In an email, MiCRO CEO Carlos Boelsterli confirmed to BNamericas that volcanic eruption is not one of the hazards covered, though El Salvador is prone such disasters.

Microinsurance targeting catastrophic risk in the Latin America and the Caribbean is on the rise. A recent study tracking initiatives in conjunction with Munich Re found that 52mn people in the region are insured by a microinsurance policy and that microinsurance gross written premiums have grown substantially from 2013 to 2016, particularly in Brazil (+1.799% in the period), Peru (+566%) and Nicaragua (+284%).

The study showed that the percentage of microinsurance premiums comprising the sector total in El Salvador in 2016 stood at 1.22% - one of the higher percentages in the region, where the regional figure is just 0.3%.

Through its local partners, MiCRO piloted a similar product in Guatemala last year, which was recently launched nationwide, and plans to expand to three additional countries in the next two years, the first one being Colombia.

"After having launched a similar product in Guatemala last year, this product launch in El Salvador shows that MiCRO's solution, the first one offering protection against natural disasters to those who need it most, is replicable, a critical factor to scale up and be able to offer this innovative product sustainably," said MiCRO CEO Carlos Boelsterli in the product launch statement.

"We are working closely with financial institutions and insurers in the region to develop commercially sustainable products that are appropriate and affordable for farmers and small businesses," said Steve Mitchell, MiCRO's board chairperson. "Anyone who may be affected by a catastrophic weather or earthquake event will be able to get the insurance protection they need from a reliable source."

The catastrophic risk index insurance policy, designed by MiCRO and provided through local partners Banco de Fomento Agropecuario and Seguros Futuro, is triggered automatically by predetermined events that are verified by objective data sources, including NASA satellites. The stronger the event, the greater the payout will be. Policyholders will also receive disaster risk reduction training through national coordinating bodies.

Critical to many Central American economies, the agriculture and small business sectors are exceedingly susceptible to weather-related events. Climate change is a threat multiplier for many such events, increasing both their intensity and frequency. Before this product, there were no index-based, catastrophic risk insurance policies specifically for low-income individuals in El Salvador.

MiCRO expects its catastrophic risk index insurance products to rapidly expand in the region.

"They will be offered through local insurance companies, which will distribute policies through aggregators, including microfinance institutions, and other organizations," said MiCRO.

Previnca in Argentina

Another recent development for microinsurance, in Argentina, health microinsurance insurer Previnca Insurance has unvelied a new product designed to provide protection to low-income families, specifically covering in instances when a household provider contracts a disease that prevents them from working.

The policies cover basic needs in the event of lost income, providing continuity in the economic livelihoods of the most vulnerable sectors of society with low saving capacity and limited access to traditional credits, as reported in Argentine insurance news outlet 100 Seguro.