Mutual Exchange Forum on Inclusive Insurance

MEFIN and Climate Risk InsuranceMEFIN - the Mutual Exchange Forum on Inclusive Insurance - encourages governments, insurers and donors to promote and invest in Climate Risk Insurance.

Briefing paper ・ May 2020

www.mefin.org ・info@mefin.org ・+63 2 8651-5164

The Asia-Pacific region is highly vulnerable to the impacts of climate risks due to its geographical location and population. Typhoons and floods are becoming more intense and frequent, long coastlines, heavily populated low-lying areas and countless small islands make the region vulnerable to weather extremes and rising sea levels. CRI alone will not manage these risks, but as part of an integrated disaster risk reduction and management (DRRM) strategy, it can limit residual risk. The Mutual Exchange Forum on Inclusive Insurance (MEFIN) aims to create an information architecture to inform decisions of regulators, insurance industry and other institutions on climate risks, and the use of public funds to absorb or transfer those risks.

MEFIN is a peer-to-peer network of insurance regulatory authorities in Asia established in 2013 to exchange relevant knowledge and best practices on inclusive insurance with the insurance industry. MEFIN came out of the Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia (RFPI Asia), a programme funded by GIZ. There are now seven member countries of the MEFIN network - Indonesia, Mongolia, Nepal, Pakistan, the Philippines, Sri Lanka and Viet Nam - who jointly pledge to support inclusive insurance as a strategy for poverty reduction in the region. Together with GIZ and the Asian Development Bank (ADB), the member countries are all signatories of the Cebu Declaration, which declares their commitment to the promotion and development of inclusive insurance markets.

MEFIN aims to create impact through public private dialogues (PPDs) on reforming the regulation and supervision of market development, institutional development and client value for the benefit of the poor. We encourage governments, insurance providers and donors to promote and invest in inclusive insurance and in CRI solutions. Through our Secretariat at RFPI Asia we organise the bi-annual PPD conference and host a series of webinars and events. We promote regional and global exchanges and training, we offer tailored support to supervisors in individual countries (for example, through pilots to develop and implement regulatory reforms), and we facilitate cooperation between the public and private sectors. MEFIN hosts a wide variety of its own publications and knowledge management products, as well as leading microinsurance business models in the form of factsheets, findings and lessons from market studies.

MEFIN country members

Destruction caused by Typhoon Haiyan in Tacloban, Philippines, 2013 Photo: Henry Donati/UK Department for International Development

Rice farmers at work in Boyolali District, Indonesia. Photo: CDC Global

MEFIN and Climate Risk Insurance・ May 2020

www.mefin.org ・info@mefin.org ・+63 2 8651-5164

Technical Working Groups

MEFIN has five technical working groups (TWGs):

Disaster Risk Insurance (DRI) helps member countries assess their respective DRI regulation and policy directions and to synchronise them with National Disaster Risk Management Plans. In consultation with the insurance industry, it promotes exchange of views and lessons learnt from existing regulations and policies, and encourages the private sector to recommend and submit ideas for possible cooperation and funding.

Regulation & Supervision helps member countries implement regulatory instruments such as consumer protection issues, regulatory reviews, regulatory impact assessment, sectoral development, financial literacy, gender and regulatory frameworks.

Knowledge Management facilitates the documentation, publication and sharing of experiences and business models that promote inclusive insurance. The group is tasked with developing a guide for designing and reviewing knowledge products prior to publication and dissemination, and ensuring the sustainability of knowledge management within the Network.

Capacity Building is responsible for developing and implementing training to international standards for MEFIN members - for example, training modules on self-assessment and regulatory impact assessment. The group also encourages insurance industry associations to participate in public-private dialogue events.

Business Models encourages peer-to-peer exchange on innovative business models in inclusive insurance, and supports regulators to get more private sector players involved in the market. The group initiates research on innovative business models, partnerships, and Insurtech.

The ‘VIP Engine’

MEFIN hosts the ‘VIP Engine’ (Vietnam, Indonesia, Philippines) project, starting with three pioneering countries, to serve as risk and financial modelling information platform, publishing aggregated hazard-exposure-vulnerability data for the reference of the insurance industry in risk analysis and catastrophe loss estimation. According to the Climate Risk Index for 1999–2018, Viet Nam, the Philippines and Indonesia are ranked 4th, 6th and 77th in the countries most at risk from climate change, yet despite this, insurance penetration is less than two percent across all three countries.

Although poverty in the VIP countries has declined in the past decade, large numbers of households rely on farming for their income and agriculture remains the main source of employment. In addition, the VIP countries share a number of challenges for scaling up inclusive CRI:

• a major reliance on agriculture in all three countries (making them especially vulnerable to extreme weather events)

• lack of good data on insurance penetration • poor support for reinsurance • complex insurance products which are hard to understand • high risks and high costs for insurance companies • poor internet and cell phone connectivity (making it hard to roll

out Insurtech products)

To overcome these challenges, the VIP Engine has adopted a multi-pronged approach:

• Policy development: establishing implementing guidelines of CRI related laws; integration of CRI in the national and local plans; tapping CRI public funds from fiscal policies; and social protection programmes; developing CRI National Strategy.

• Business and product development: enhancing current products in the market; index-based insurance; stronger reinsurance support; exploring new distribution channels; utilising shared economy.

• Awareness raising and outreach: social media strategy; community involvement; and collaboration with government agencies and private companies.

• Insurtech: climate risk and financial modelling platform; artificial intelligence and machine learning; learning management platform for insurance professionals; and social media.

• Partnerships: developing public-private partnerships (PPPs) and strategic alliances; stronger participation between commercial companies, cooperative societies, MFIs and reinsurers.

‘VIP Engine’ countries - Viet Nam, Indonesia and the Philippines

Water vendor in Jakarta, Indonesia. Photo: Alamy