World Bank and Donors
Table A4.1 Property Catastrophe Insurance for Homeowners
Project Country
Date
implemented Status Description Volume Donor/IFI role
Turkish Catastrophe Insurance Pool
Turkey 2000 Completed Insurance pool offering earthquake indemnity-based insurance to middle-income homeowners. The pool can sustain a 1-in-250 year event through reserves and reinsurance capacity.
2.5 million homeowners (17% insurance penetration) insured under this program in 2006. The annual premium volume is $150 million.
1. Initial capacity building funded under a WB investment loan. 2. Contingent debt of $180 million to
speed up the building of reserves. 3. Funding of the reinsurance
premium (loan) the first two years. Global Index
Reinsurance Facility
World n.a. Under preparation
Multi-donor trust fund linked to a specialist index reinsurance company, which will promote (agriculture and non-agriculture) index-based insurance in developing countries.
n.a. MDTF managed by WB, including EUR 25 million from the European Union for ACP countries for technical assistance and premium subsidies.
Catastrophe insurance
Romania n.a. Under preparation
Compulsory indemnity-based insurance against earthquakes, floods, and landslides, sold by insurers that are members of the Catastrophe Insurance pool.
n.a. (compulsory law to be enacted by the parliament)
Initial capacity building funded under a WB investment loan.
China Catastrophe Risk Assessment
China n.a. Under preparation
CAT risk assessment analysis for rapid- on set disasters, which may lead to the development of a national catastrophe insurance pool.
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Table A4.2 Agricultural Insurance
Project Country Date implemented Status Description Volume Donor/IFI role
Index-based live- stock insurance
Mongolia 2005 Ongoing (pilot) Index-based insurance program to protect Mongolian herders against livestock mortality. The pro- gram includes a vol- untary commercial product, sold by domestic insurance companies, and a voluntary social product. A Livestock Insurance Indemnity Pool (LIIP) was set up to ring fence the livestock mortality losses. The LIIP rein- sured by the govern- ment, backed by a $5 million IDA credit. The project has been piloted in three provinces since 2005. In 2007, 3700 herders purchased insurance for about 600,000 animals (10% pene- tration rate) for a premium volume of $110,000.
1. Technical assistance financed by WB, Japanese grant (PHRD) and the Trust Fund First Initiatives. 2. $5 million contingent facility (IDA credit) to be triggered if the LIIP reserves are insufficient to pay all claims in a disaster year.
3. No direct premium subsidies
Project Country Date implemented Status Description Volume Donor/IFI role Weather-based crop
insurance
India 2003 Ongoing The public crop insur- ance company AICI and private insurers (e.g., ICICI Lombard, IFCO Tokyo) sell weather- (paramet- ric) based insurance product against drought and excess of rainfall. 700,000 farmers insured in 2007 for a total premium volume of US$30 million. Non-lending technical assistance from WB Direct premium subsidies.
Weather insurance Malawi 2005 Ongoing Index-based weather insurance products for farmers to strengthen agricul- tural lending in Malawi. In 2007 $300,000 of weather-related credit risk has been insured by Insurance Association of Malawi and reinsur- ance has been accessed for first time. The market is expected to grow rapidly in size in next few years as product is mainstreamed into Malawi agricultural credit system.
Non-lending technical assistance to Malawi private sec- tor (MFI, banking, insurance) by WB.
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Weather insurance Central America (Guatemala, Honduras, and Nicaragua)
2008 Ongoing Supporting market development for agricultural weather insurance at farmer level, through three components: 1) pub- lic policy and regula- tory framework; 2) information platform and weather data access to the indus- try; and 3) pilot proj- ects for training purposes. First transactions planned for 2008–9 agricultural season. Expected transactions of about $5 million for the first year, with increasing volumes as project scales up. Non-lending technical assistance co- financed by Inter- American Develop- ment Bank (IADB), Central American Bank for Economic Integrations (CABEI), and the World Bank. The project is led by the Latin American Federation of Insur- ance Companies (FIDES), with the participation of insurers associations in each country. Weather insurance Thailand 2007 Ongoing Index-based weather
insurance for Bank for Agriculture and Agricultural Cooper- atives (BAAC) farmer borrowers.
First Pilot Year (2007): $3,000 in premiums for $42,000 in sum insured. Market, especially for
flood risk, is expected to grow rapidly due to large BAAC client outreach and stakeholder interest.
Non-lending technical assistance to General Insurance Associa- tion, Thai Re and BAAC by WB Product development research is being carried out for flood- index insurance for rice by WB.
Table A4.2 Agricultural Insurance (continued)
Project Country Date implemented Status Description Volume Donor/IFI role
Weather insurance Ethiopia 2007 Ongoing WB Financial Sector Capacity Building loan includes weather insurance component to focus on increasing infra- structure, training, and demand for index-based weather insurance compo- nents targeted to farmers.
$1 million loan over 5 years Component of Financial Sector Capacity Building Project/Loan with the government of Ethiopia, with Tech- nical assistance from WB.
Weather insurance (micro level)
Senegal n.a. Under preparation Pilot drought index- based insurance for peanut producers
n.a. Technical assistance from WB Weather insurance
(micro level)
Kenya n.a. Under preparation Joint program with the Financial Sector Deepening Trust (FSDT) to provide weather insurance to farmers. Coopera- tive Insurance
n.a. Technical assistance from WB. Financial support for
project management and market research by the FSDT.
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Company is looking for partners in the financial sector to collaborate on rolling out weather insurance products. Working with the insurance company and FSDT in 2007, a test run of a pilot was carried out. Agriculture
insurance
Nepal n.a. Under preparation Technical assistance requested by the government of Nepal for the development of agriculture insurance (crop and livestock).
n.a. Technical assistance from WB, funded by GFDRR
Agriculture insurance
Bangladesh n.a. Under preparation Technical assistance requested by the government of Bangladesh for the development of index-based crop insurance (including flood).
n.a. Technical assistance from WB, funded by GFDRR
Table A4.2 Agricultural Insurance (continued)
Project Country Date implemented Status Description Volume Donor/IFI role
Flood index insurance
Vietnam n.a. Under preparation Flood index crop insur- ance product designed to hedge the crop loan portfo- lio of the agricultural bank VBARD.
n.a. Project funded by ADB.
Index-based rice insurance
Indonesia n.a. Under preparation Technical assistance requested by the government of Indonesia to pilot weather based rice insurance.
n.a. Technical assistance from WB, funded by GFDRR
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Table A4.3 Sovereign Catastrophe Risk Insurance (continued)
Project Country Date implemented Status Description Volume Donor/IFI role
Catastrophe bond Mexico 2006 Completed The sovereign disaster fund FONDEN issued a three year catas- trophe bond, the Cat-Mex bond, to transfer earthquake risk to investors.
US$160 million catas- trophe bond issued at a LIBOR + 2.35% (Class A) and LIBOR + 2.3% (Class B). This corresponds to a multiple of 2.5. Technical assistance provided by the WB and the Trust Fund First Initiatives.
Weather derivative Ethiopia 2006 Completed (First Phase) Weather derivative pur- chased by UN World Food Programme (WFP) to secure con- tingency funding for livelihood-saving emergency relief operations to protect vulnerable popula- tions in case of severe drought in Ethiopia.
First Phase (pilot): Parametric drought coverage of $7.1, protecting 60,000 vulnerable house- holds, for a $930k premium through competitive tender (13% ROL). First Phase: 1. Transaction arranged by WFP, with TA from WB. 2. Premium paid by USAID. Caribbean Catastrophe Risk Insurance Facility
Caribbean 2007 Ongoing The mutual insurance pool offers paramet- ric insurance against earthquakes and hur- ricanes to Caribbean governments.
16 countries purchased insurance for a total of coverage of $500 million. Total premi- um volume is about $20 million.
1. Technical assistance financed by WB and Japanese trust fund (PHRD).
2. $47 million contribu- tions from WB, UK,
Project Country Date implemented Status Description Volume Donor/IFI role The facility secured
$110 million on the reinsurance and cap- ital markets, which with its own reserves allows it to sustain a 1-in-1,000- year event.
Canada, and France will cover initial operating expenses (including reinsur- ance premium) and insurance payouts. 3. Insurance premiums
of 4 OECS countries (St. Lucia, Dominica, Grenada, and St. Vincent & the Grenadines) and Haiti financed for three years through an IDA credit and an IDA grant, respectively. Contingent credit facility Colombia 2005 Ongoing Contingent loan as part
of a $250 million APL for Natural Dis- aster Vulnerability Reduction Program with the government of Colombia.
$150 million contingent debt to the govern- ment of Colombia, to be disbursed against a list of positive imports in the after- math of a natural disaster (declaration of emergency by the central government) Technical assistance provided by the WB.
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Catastrophe swap Caribbean 2007 Ongoing The World Bank Treas- ury has arranged for CCRIF to transfer a portion of the catas- trophe risk to the capital markets through a swap transaction.
$20 million catastrophe swap in the top layer.
CCRIF paid fees for service to the WB treasury.
Catastrophe Risk Deferred Drawdown Option facility (CAT DDO)
IBRD clients 2008 Ongoing Offers middle-income countries immediate liquidity up to USD500 million or 0.25% of GDP (whichever is less) if they suffer a natural disaster. It offers bridge financing while other sources of funding are being mobilized. Funds will be disbursed when a country suffers a natural disaster and declares a state of emergency.
More than 10 countries already expressed interest
Contingent loan offered by WB
Project Country Date implemented Status Description Volume Donor/IFI role Countries signing up
for the facility must have a hazard risk management pro- gram in place that is monitored by the WBG and an ade- quate macroeco- nomic framework Pacific Catastrophic Risk
Pool Initiative
South Pacific Islands
n.a. Under preparation Collective reserve fund backed by reinsur- ance against catastrophe losses (earthquakes, tropi- cal cyclones) for Pacific islands.
n.a. Technical assistance (feasibility study) provided by WB and funded by GFDRR.
Multi-Country Catastrophe Bond
WB clients n.a. Under preparation Multi country catastro- phe bond issued with SPV. The WB Treasury will be the arranger and the convening agent.
n.a Catastrophe bonds issued on commer- cial terms. Technical assistance provided by WB Treasury and partly funded by GFDR.
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Central America Cata- strophic Risk Insur- ance Pool
Central American countries
n.a. Under preparation Collective reserve fund backed by reinsur- ance against catastrophe losses for Central American countries. Similar to CCRIF.
n.a. Technical assistance (feasibility study) provided by WB and funded by GFDRR.
Weather derivatives Ethiopia n.a. Under preparation Developing a compre- hensive ex-ante country risk manage- ment framework for livelihood security in Ethiopia, including linkage to WB- supported Productive Safety Net Project, indexed contingent grants, and weather risk transfer component.
n.a. Joint initiative between govern- ment of Ethiopia, WFP, WB and DFID
Project Country Date implemented Status Description Volume Donor/IFI role Weather derivatives Malawi n.a. Under preparation Weather derivative con-
tract to transfer the financial risk of national drought that adversely impacts national maize produc- tion and the govern- ment’s budget. Part of Malawi’s agricultural risk management framework for food security, complement- ing and enhancing price risk management tools the government has in its portfolio to financially manage this maize production risk using ex-ante market- based instruments and other investments (e.g., warehouse receipts, etc.)
First transaction planned for 2008/9 agricultural season, dry run in 2007/8. Expected transaction
size: $10 million a year for 4 years.
1. Technical assistance from CRMG/ARD (WB).
2. Premium financing and Malawi weather net- work upgrade through donor budget support (DFID, USAID, EU)