Clinton Global Initiative Commitment: Cholera Insurance for Haiti

First-of-its-kind, scalable model for natural disaster microinsurance will protect against economic aftermath of disease

Today Mercy Corps, Haitian microfinance institution Fonkoze and global reinsurance company Swiss Re announced a Commitment to Action, Insuring Haiti’s Most Vulnerable against Cholera Risk, at the Clinton Global Initiative (CGI) Annual Meeting. The Microinsurance Catastrophe Risk Organization (MiCRO), a company co-founded by the three organizations earlier this year, will develop a model that uses indicators of cholera, such as rainfall, to trigger an automatic insurance payout, speeding up the process of paying individual claims. A disease caused by water-borne bacteria, cholera cases unfailingly increase during rainy seasons.

The commitment extends MiCRO’s powerful microinsurance platform and underwriting technology beyond natural disasters to allow Fonkoze clients access to short-term financial support if a member of the family is affected by cholera. This ensures a safety net is in place to lessen the financial impact and potentially catastrophic risks of the disease. MiCRO will specifically target female entrepreneurs, whose families are particularly vulnerable to health and economic shocks.

“A cholera outbreak can devastate a family both emotionally and financially,” said Steve Mitchell, vice president of financial services at Mercy Corps. “The goal of this product is to protect the gains made by small business owners, and empower them to continue building an economically secure and stable future.”

The World Health Organization (WHO) reports that there have been over 385,000 cases and nearly 6,000 deaths since cholera was first detected in Haiti almost a year ago. Without safe water and sanitation infrastructure in place, the disease is likely to grip Haiti for years to come, imperiling the productivity and development of a country already struggling to recover from the devastating 2010 earthquake.

Especially in rural areas, many families rely on women who run small businesses for nearly all of their meager incomes. If the income earner falls ill with cholera — even temporarily — families are burdened by the costs of recovery and loss of income. Too often, they fall deeper into poverty.

The cholera microinsurance policy will allow women who borrow from Fonkoze to receive an amendment to their loan contracts compensating them through loan reductions and emergency cash. “We expect this cholera policy will help to ensure that the infection of an income provider does not result in destitution for the entire family," said Michel Liès, Swiss Re Chairman of Global Partnerships. “We also anticipate that the index we develop for MiCRO can potentially be applied to other infectious diseases in other parts of the world,” he added.

The heavy rains in June triggered an automatic payout from reinsurer Swiss Re, allowing Fonkoze to reimburse more than US$1 million in damages and loan reimbursements for nearly 4,000 of its small business owners. Payments from Fonkoze eliminated the value of the clients’ debt and paid a fixed sum for the business rebuilding process. This marked the first time that eligible borrowers were protected by natural disaster insurance and compensated for business losses associated with that risk.

“We saw the power of this insurance product to help people and communities get back on their feet,” said Anne Hastings, CEO of Fonkoze Financial Services. “Many of our clients would lose their small businesses after a hurricane or tropical storm. The recent renewed outbreak of cholera and its financial impact on our borrowers is a stark reminder that the word ‘catastrophe’ should not be limited to natural disasters alone.”

MiCRO was formed in March 2011 by a syndicate of strategic stakeholders with the long-term goal of offering micro-insurance to the most vulnerable communities throughout the world. The initial product offering is a first-of-its-kind, scalable model for microinsurance in Haiti that protects women micro-entrepreneurs against the economic aftermath of severe natural catastrophes. MiCRO was recently awarded “2011 Company Launch of the Year” by The Review, a global insurance trade publication, and recognized as the year’s “most significant new venture in an area of market need.”

Swiss Re will begin designing the cholera product next month and a pilot test will take place with existing Fonkoze women borrowers in the spring of 2012. Mercy Corps will work with Fonkoze to manage the distribution and educational rollout of the cholera microinsurance policy pilot test.