The LeapFrog Financial Inclusion Fund recently announced that it has raised USD 44 million. This was reported on several news portals including Bloomberg, the Corporate Social Responsibility Newswire, the Press Portal website and CNBC. The fund has been billed as the world’s first investment fund that is focused on microinsurance. The fund aims to invest in or partner with businesses that offer insurance products and financial services to low-income communities throughout Africa and Asia, including India, Pakistan, South Africa and Uganda.
The funds were raised from a diverse set of public and private investors around the world, including the European Investment Bank (EIB), Fiduciary/Claymore Opportunity Fund (FMO), Omidyar Network, Triodos-Doen Foundation, Hivos-Triodos Fund, Accion International, Calvert Large Cap Growth Fund, wealth manager Felipe Medina, and the LeapFrog team. The team consists of former CEOs and practitioners in insurance and investment in emerging markets.
Proponents of the landmark deal regard the microinsurance market as one that is under-tapped and under-served. Support for this view was derived from a report dated April 2007 entitled “The Landscape Of Microinsurance In 100 Of The World’s Poorest Countries” which is available on the Microfinance Gateway portal. The report was written by Jim Roth, Michael McCord and Dominic Liber of the actuary and statistics consultancy firm, Quidiem Consulting, and was published by the MicroInsurance Center, LLC, an organization established in 2000 primarily to look into product development and advocacy in the microinsurance sector. The International Labour Organization and some members of the CGAP Working Group on Microinsurance provided comments on the report.
The report suggested that the potential for growth in the microinsurance market is significant and estimated a market size of one billion people (but with less than three percent of those people currently having any kind of insurance cover). This report also offers useful information on the microfinance supply chain which consists of five key components: the reinsurers, the insurer, the delivery channel, the policy-holder and ‘covered lives’. A team of microinsurance practitioners, who identified and assessed micro-insurers, products, delivery channels, regulations, social security schemes and donor interventions, gathered the information for the report from primary and secondary research. They found that health microinsurance was widespread particularly in West and Central Africa and this particular market had limited growth potential. They also found a noticeable lack of microinsurance in North Africa and the Middle East. In general, microinsurance activity was hindered by the lack of broker activity and weak delivery channels. The report concluded that microinsurance for the world’s poor is growing fast, with most growth coming from the private sector, and micro-insurers are positive about the future, predicting 100% growth over the next five years. It is unclear what the current size of the microinsurance market is. The report was also covered in a former Paper Wrap-Up on the Microcapital portal.
Among the conventional insurance companies that are running insurance operations in developing nations are Zurich Financial Services AG, Allianz SE and Munich Re. On the Allianz SE website, it is stated that the company has distributed death and disability insurance to 29,000 clients in Egypt and 1,000 clients in Senegal with technical assistance from the international non-profit organization, Planet Finance. It is also stated that Allianz SE has distributed 242,200 policies (including life, health, property and accident insurance) in India with technical assistance from the international organization that focuses on poverty alleviation and emergency relief, CARE International. A press release on the Munich Re website notes that the company currently provides insurance against flooding in Indonesia.
Microinsurance has been in the news recently. MicroEnsure, an insurance intermediary designed to help the poor in the developing world obtain insurance cover, was one of the winners of the recent FT Sustainable Banking Awards 2009. This was covered in a recent Microcapital Story dated 9 June 2009. Whether or not ‘Microinsurance’ will become the next buzzword will depend on numerous factors including the removal of existing regulatory and other obstacles to the delivery of microinsurance products to the poor, the increase in numbers of microinsurance participants in the market and the increasing awareness of the actual impact of microinsurance on those who are said to require such protection.
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