New business insurance facility created
Published:Friday | April 8, 2011 | 12:00 AM
Sabrina Gordon, Business Reporter
A new insurance facility, backed by regional donors, has been create for micro and small businesses in Haiti in the event of disruptions in commerce after a natural disaster.
The new facility is called Microinsurance Catastrophe Risk Organisation (MICRO).
"It will empower Haiti's microentrepreneurs to protect themselves against the economic aftermath of severe natural catastrophes," said CGM Gallagher Group, whose risk analytics arm, Caribbean Risk Managers Limited (CaribRM), is among the founders of the insurance facility.
The facility is the first of its kind in Haiti and is said to be "aimed at the country's informal sector, the organised poor who have taken steps to increase their economic standing and stability through the creation of small businesses".
"This long-term insurance platform will enable Haiti's informal sector to recover more quickly after natural catastrophes, with potential expansion to protect Haitians from other kinds of risks in the future," said CGM in a release.
Simon Young, chief executive officer of CaribRM, said his agency will act as the technical manager, providing underwriting expertise while Marsh, a captive insurer in Barbados, will also provide assistance.
Explaining how the facility will work, Young said the catastrophe insurance product will be administered through a third party company called Fonkoze - Haiti's largest microfinance institution with a client base of over 50,000.
To access the product, he said, clients will be required to pay an additional three per cent premium on the value of any loan from Fonkoze.
Then, in the event of any natural disaster and damage to the business and disruptions in servicing the loan, Fonkoze will write off the debt and pay out a fixed sum of US$150 for the rebuilding process, Young explained.
Fonkoze will also commit to providing a new loan to the entrepreneur, he said.
The development of MICRO was completed on March 17, 2011, with Fonkoze and Mercy Corporation, a global non-profit organisation based in United States, as the initial investors.
Other donors expected to come on board are the investment arm of the World Bank and the Inter-American Development Bank, the Department for International Development in the United Kingdom and Swiss Re, which also act as the re-insurers for the facility.
Between Mercy Corporation and Fonkoze, US$2.5 million has already been pledged; as negotiations with other donors are continuing.
The fund is expected to reach US$5 million by start-up within the next month.
While MICRO was initially developed for Haiti, Young said the plan is to expand it to other countries within the Caribbean region.
"The natural next place to go is the Dominican Republic, because the model can be easily transfer to there," he said.
"But we intend to expand it to other regions through microfinance institutions or credit unions," Young said.