In CAT-Prone Haiti, Microinsurance Gains Steam

When Hurricane Sandy struck Haiti late last year, the home Guerda Pierre shares with her three children and mother in Cabaret, north of Port-au-Prince, was flooded - and so was the merchandise she sold to make a living.

PORT-AU-PRINCE, Haiti, Jan 29 When Hurricane Sandy struck Haiti late last year, the home Guerda Pierre shares with her three children and mother in Cabaret, north of Port-au-Prince, was flooded - and so was the merchandise she sold to make a living.

"The books, the food, everything was wet after Sandy," said Pierre. The plantain plants and beans in her garden were also destroyed.

But unlike the majority of Haitians, Pierre had an insurance policy.

As a borrowing client at Fonkoze, a Haitian microcredit organization, she was automatically covered under its natural disaster insurance policy. Through MiCRO (Microinsurance Catastrophe Risk Organization), she had her existing debt wiped clean, a new credit account with Fonkoze instated for the same amount. And she received a payout of about $60 to help her get back on her feet quickly.

On Tuesday, the International Finance Corporation (IFC), a division of the World Bank, announced $1.7 million in funding, plus technical assistance, to support the program.

MiCRO, the first natural catastrophe insurance scheme of its kind in Haiti, was founded by Fonkoze, the international relief organization Mercy Corps and a number of other partners after a devastating earthquake in Haiti in January 2010.

The program was rolled out officially in January 2011, and all of Fonkoze's microloan clients across the country were automatically insured - well in time for the hurricane season.

"The objective is to show the feasibility of insurance that can protect the poor," said Ary Naim, IFC's director for Haiti and the Dominican Republic.

One of the most weather disaster-prone countries in the world, Haiti's most vulnerable residents rely on small-scale farming and are in constant risk of losing their livelihoods. This can force them to start from zero after each disaster, said Anne Hastings, CEO of Fonkoze.

It's a dangerous cycle that the Haitian state and its partners are beginning to address. MiCRO, by offering insurance as well as training on how to minimize risk, hopes to offer a partial solution.

MiCRO's activities are supported locally by Haitian insurer Alternative Insurance Company S.A. (AIC), along with global reinsurer Swiss Re.

According to Olivier Barrau, AIC's chief executive officer, out of a population of 10 million, less than 300,000 Haitians have access to any formal insurance product.

"Haiti has the lowest penetration rate for any insurance in the region," said Barrau. In neighboring Dominican Republic, an average of $64 is spent per person on insurance annually, while in Haiti the average is a paltry $3.

While similar disaster micro-insurance schemes exist elsewhere in the world, Barrau says they don't operate under the same model as MiCRO.

Fonkoze has some 290,000 clients, and countless others use their currency exchange and cash transfer services in 46 locations across the country. Some 65,000 female entrepreneurs are now enrolled in their microloans program, borrowing anywhere between $25 and $1,200 on six-month loan cycles.

These borrowers pay 3 per cent of their loan value per cycle to be covered under MiCRO. For Pierre, the sole earner in her family, the roughly $14 she pays annually for insurance is money well spent.

MiCRO has its sights set on expansion, including into the agricultural sector.

Hurricane Sandy struck in late October last year, rounding out a year that had already pummeled Haiti with heavy rain, wind and drought. More than $250 million in losses were recorded in total, and with little or no safety net, more than 2 million people were plunged into greater food insecurity.

Haiti's natural disaster micro-insurance program was a "grand experiment," said Hastings. "If it can work here, it can work anywhere."