Fonkoze hopes to expand microinsurance JV into health, P&C segments

Haiti's largest microlender, Fonkoze, is looking into expanding its microinsurance offering following the success of its first product, which provides natural disaster coverage, the firm's top managers told BNamericas. Earlier this year, Fonkoze launched the Microinsurance Catastrophe Risk Organization (MiCRO) company, together with relief development agency Mercy Corp, reinsurance broker Guy Carpenter and Caribbean Risk Managers. The new company counts on reinsurance from Swiss Re. MiCRO insurance is mandatory for every Fonkoze loan. In the case of natural disasters, the policyholder receives reimbursement on their outstanding loan balance, a fixed sum of 5,000 gourdes (US$125) toward reconstruction and a new loan to restart their business. The policy costs 5% of the loan value, with the price roughly split 60/40 between the client and international donors. At present, the policy covers nearly 55,000 Fonkoze clients. Fonkoze CEO Anne Hastings said any initial resistance to higher loan costs from the clients was swept away during the unexpected heavy rains in May. "Completely unpredicted, we had to pay out US$1.05mn in insurance claims," Hastings said. "But you couldn't have asked for anything better, if you want to know the truth of the matter, because it helped to convince the otherwise reluctant borrowers about the impact the policy could have." Fonkoze financial analyst James Kurz said: "Perhaps by coincidence and perhaps because the model was well designed, the actual losses were almost the same as the parametric payout. So this matched up very well for us during the first test." The challenge for Fonkoze now is to move beyond the basic catastrophe loss coverage and meet its clients' demand for even more challenging insurance projects. "After the earthquake [last year], we have seen strong demand for health insurance," Hastings said. "The challenge now is, How can we give health insurance products in a country with hardly any healthcare professionals and institutional healthcare providers?" Clients also want micro insurance products for theft and fire, which are hard to cover because of the required investigative capacity on part of the insurance provider, Kurz noted. UNIQUE CONCEPT "MiCRO is a very unique insurance company. And the catastrophic insurance is its first product. We are anxious for other microfinance institutions as well as NGOs to consider joining," Hastings said. Last month Swiss Re's public sector VP, Nikhil da Victoria Lobo, told BNamericas that the idea is to expand MiCRO to other Latin American and Caribbean countries in the near future. According to Kurz, MiCRO offers microfinance intuitions a unique middle ground between the ease of purchasing an existing product from a third-party insurance company and the customization of self-insuring. "What's interesting about this is that we are actually equity holders. We hold the reins over the direction and new product choices. And the other institutions who wanted to come in would have the same degree of control," Hastings said. "That makes it a much, much better alternative for an institution like Fonkoze, rather than having to do the whole thing ourselves or just hand it over to an insurance company." MiCRO has capital of about US$3.5mn, with roughly US$1mn contributed by the initial shareholders Fonkoze and Mercy Corp, and US$2.5mn donated by governmental aid agencies in the UK and Switzerland to a special trust fund managed by the Caribbean Development Bank. The capital base is expected to grow US$5mn in the near future.