Munich Re’s microinsurance

Munich Re has backed a Philippine cooperative insurance company Coop Life Insurance & Mutual Benefit Services (CLIMBS) microinsurance scheme to offer weather insurance on loans.

It said: “A core concern is to pass on the benefits to end customers in low-income households. Extreme weather events such as severe typhoons pose financial risk to microfinance institutions like cooperatives.

“These events interrupt the cash flow as member borrowers often cannot repay their loans, thus leaving the cooperative in a state of insolvency.”

Insurance arrangements

CLIMBS acts as primary insurer for the local cooperatives and offers them portfolio protection. The cooperatives will receive a predefined percentage of their loan portfolio if a parametric trigger for rainfall or wind speed is reached. The trigger levels vary for each municipality determined by the area’s exposure to typhoons

The insurance payout will be used by the cooperatives to assist them, for example, in rebuilding their dwellings or replacing livestock or other assets.

Expertise

“This innovative 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”, says Thomas Mahl, Business Development Manager at Munich Re Singapore.

“Our in-depth expertise of natural catastrophe insurance made the development and pricing of this product possible, even in such high risk areas.” Munich Re is the sole reinsurer of the product.