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ADB’s Support for Emerging Microinsurance under JFPR9118:

“Developing Microinsurance in PHI”

Hiroyuki AokiSenior Financial Sector Specialist, SERD/SEPF

Asian Development Bank

ICMIF-AOA Development Network Seminar20 September 2013Manila, Philippines

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Outline

Introduction – What is a Microinsurance? Past ADB’s Supports for Microfinance in

the Philippines JFPR9118: Developing Microinsurance in

PHI What We Achieved

Some Thoughts for Next Steps

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Introduction

What is a Microinsurance?

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What is a Microinsurance?

General Understanding: “Insurance service for the Poor”

One of Financial Services for the Poor? The Poor needs risk protection measures in addition

to credit, saving, remittance and payment services.

A Tool for Social Welfare or Social Protection?

Health/medical insurance for complementary to public health system, or alternative in some countries

Agro/Crop Insurance for the Farmers? Because the farmers are poor!

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What is a Microinsurance?

Assumption: Microinsurance is the insurance service to accommodate the cash flows of the Poor (sometimes called “affordability”).

Small Amount of Premium? Small policies means many transactions with small

amounts. New Technology to Reduce the Costs?

Mobile banking, e-payment or Paperless Policies, etc

Government Subsidy? Typical for Agro/Crop Products

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What is a Microinsurance?Challenge: How can we manage

various stakeholders under various constraints?

Policy makers

Regulators/Supervisors

Other Government Agencies Microinsurance Providers/Distributors

Beneficiaries

Communities/Local Governments

Development Partners

We need some common understanding!!!

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Past ADB’s Supports for Microfinance in the Philippines

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ADB Microfinance Development Strategy in 2000

Goal To ensure permanent access to institutional

financial services for the majority of poor and low income households and their microenterprises through the development of sustainable microfinance systems

Definition of “Microfinance” Broad range of financial services such as

deposits, loans, payment services, money transfers and insurance to poor and low income households and their microenterprises

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Philippine Microfinance Strategy

Approach Increased role of the private sector

Government to focus on establishing the enabling policy and regulatory environment

Adoption of market oriented financial and credit policies

Non-participation of government line agencies in implementing credit programs

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Past ADB Supports for Microfinance Microfinance Development Program

(2005-2007) A program loan that called for further

development of the microfinance sector through the strengthening of the microfinance policy environment, improvement of regulatory capacity, MFI capacity, and financial literacy

JFPR9088: Developing Financial Cooperatives (2006-2010) Support to the MDP program loan above Assisted the Government in further improving

the regulatory environment for credit and savings cooperatives engaged in microfinance services.

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JFPR9118:Developing Microinsurance

in PHI

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Why Microinsurance Development?

Past projects mostly address the savings and credit needs of the poor

With sustainable access to savings and credit services, both MFIs and government recognized the need for risk protection

Low income households need insurance to address their risk protection

Then, the need to develop the Philippine Microinsurance Industry

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JFPR9118: Developing MI in PHI

Four-year grant project with the following three components (2008-2012)

Component 1: Improving Regulatory Framework for Microinsurance

Component 2: Strengthening the Capacity of Government regulators and Microinsurance Providers

Component 3:Promoting Financial Literacy on Microinsurance

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What are the progress?

Component 1:Improving Regulatory Framework for Microinsurance

The Microinsurance Regulatory

Framework was prepared in 2009 The Performance Standards (PS)

“SEGURO” for Microinsurance was developed in 2010S for Solvency, E for Efficiency, G for Governance, U for Understanding of Product by Clients, R for Risk Based Capital and O for Outreach

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What are the progress?

Component 2:Strengthening the Capacity of Government regulators and Microinsurance Providers

The Module and Training Program on

the Performance Standards were developed and implemented for both Regulators and Microinsurance Providers in 2011/2012

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What are the progress?

Component 3:Promoting Financial Literacy on Microinsurance

The Materials for Financial Literacy

Campaign was developed in 2009 Regional Financial Literacy Roadshow

has been implemented in 2011/2012

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What We Achieved

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Formalization of Microinsurance Sector Approval and Launch of the Regulatory

Framework for Microinsurance

Revised Regulation on Microisnrance Products

Formalization of Informal Microinsurance Schemes

Training and Licensing of Agents

Insurance Commission has got the ability and responsibility to monitor the Microinsurance Industry and related reliable statistics became available!

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Market Development of Microinsurance Product Development

More variety of products from life and non-life, not just a credit life product (about 60 products in 2011, 40 life and 20 non-life)

Product ProvidersNew entries from insurance industry and diverse players in the market, MBAs, Cooperatives and Insurance Companies (44 providers in 2011, 17 MBAs, 2 Coops and 25 Insurance Companies)

Outreach 3.5 million policies were issued in 2011

26.7 million of population out of 90 million are below poverty line. Well above 10% coverage for the Poor.

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Some Thoughts for Next Steps

THANK YOU!

Hiroyuki AokiSenior Financial Sector Specialist, SERD/SEPF

haoki@adb.org