MICROCAPITAL BRIEF: International Finance Corporation (IFC), European Commission and Netherlands’ Ministry of Foreign Affairs Launch ‘Global Index Insurance Facility’ to Expand Access to Microinsurance

The International Finance Corporation (IFC), European Commission and Netherlands’ Ministry of Foreign Affairs recently announced the launch of the Global Index Insurance Facility (GIIF), a reinsurance vehicle aimed to mitigate catastrophic risks in developing countries. Index-based insurance provides policies that pay a set amount in the event of a measurable occurrence of a natural disaster, e.g. an earthquake registering a certain magnitude or a drought that has lasted for a certain number of days. The objective of the Facility is to “assist in the development of a truly global market for index-based insurance instruments” by providing four main functions: market intermediation, risk pooling, limited holding of risk or “risk warehousing,” and market development.

The GIIF will be managed by the IFC. The initial proposal for the Facility, created in 2006, stated that the GIIF would have an authorized capital of USD 100 million. The proposal also stated that shareholders were anticipated to include a lead private sponsor with 30 to 50 percent, the IFC and European Investment Bank with up to 20 percent each, and multilateral and bilateral investors to cover the balance. So far, the European Commission has provided USD 36.87 million (EUR 24.5 million). Further financial details have not been released.

By: Stefanie Rubin, Research Assistant

About the International Finance Corporation (IFC):

A member of the World Bank Group, IFC uses loan and debt securities, equity investments and guarantees as instruments of poverty alleviation. It “invests in companies and financial institutions in emerging markets” as well as providing technical assistance. The IFC has 182 member countries that “collectively determine its policies, and approves investments.” In fiscal year 2009, its new investments totaled USD 14.5 billion.

About the European Commission (EC):

The European Commission is the executive body of the European Union. It drafts proposals for European laws and implements decisions of the Parliament and Council. The EC was set up in the 1950s under the EU’s founding treaties.

About the European Investment Bank (EIB):

The EIB was created in 1958 as the long-term lending bank of the European Union. In addition to supporting projects in EU Member States, its main priorities include financing investments in future Member States and EU Partner countries, principally in the area of small and medium-sized enterprises. In 2008, the EIB raised close to EUR 60 billion. According to its website, “the EIB operates on a non-profit maximizing basis and lends at close to the cost of borrowing.”

Additional Resources:

Source Article: IFC Press Release: “IFC Helps Expand Access to Natural Disaster Insurance for Emerging Market Farmers,” http://www.ifc.org/ifcext/media.nsf/content/SelectedPressRelease?OpenDocument&UNID=F9996ACE0AFCD73C8525768000544BB7

2006 Overview of GIIF: www.proventionconsortium.org/themes/…/GIIF_overview_Feb06.pdf

Europa Press Release: EU supports global insurance fund to help ACP countries ‘weather future storms’ from climate change: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/1782&guiLanguage=en

MicroCapital Universe: IFC: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation

MicroCapital Universe: EIB:

https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Investment+Bank

Europa: European Union Institutions and Other Bodies: http://europa.eu/institutions/inst/comm/index_en.htm

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