Microinsurance

Access to loans and insurance fulfils an important development policy function: for many families it creates the prerequisite for them to establish and safeguard their existence. People with very little money can rarely afford insurance, however.

Since the first microloans were granted at the end of the 1970s in Bangladesh, programmes of this kind have proved to be an effective tool for developing the economy and combating poverty. According to estimates, at the end of 2004 there were more than 10,000 initiatives, from which 400 to 500 million people benefited directly or indirectly. Microloans support the establishment of an economic existence, thereby providing a self-determined way out of poverty, which is becoming an increasingly urgent problem as the world population grows. In wide areas of developing countries, however, even minimal financial services are seldom available for poor people. The United Nations therefore declared 2005 to be the "International Year of Microcredit" in order to underscore the importance of microloans in combating poverty.

An important complement to these microloans is the concept of "microinsurance", i.e. basic insurance cover against the most important risks is provided against payment of a minimal premium. This cushions them against serious emergencies, against which even savings and loans offer no effective protection. In addition, specially developed catastrophe bonds or weather derivatives, as well as tailor-made reinsurance, can ensure that the existence of microinsurance programmes is not jeopardised by extreme events.

To place the insurance of poor people in developing countries on a broad professional basis is also a challenge for the insurance industry. As many insurers shy away from the administrative expense, or cannot afford it, and rarely have access to the people affected, development-aid organisations, local non-government organisations (NGOs), government representatives and the insurance industry must together take the initiative.

In line with its remit to support people in risk, the Munich Re Foundation organises a series of conferences on the subject of microinsurance. There, experts from the insurance industry and international organisations will have a broad forum for discussing experiences and concepts for overcoming existing obstacles in this area.