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Catastrophic Loss Micro Insurance

Pilot Program
Mercy Corps Haiti / Fonkoze
March 2010

I. Introduction
The 12 January earthquake led to at least 230,000
deaths, un-quantifiable personal injuries, and colossal
damage and destruction to infrastructure, businesses and
homes. Over two million Haitians have been displaced.
Within this context, Mercy Corps partnered with Fonkoze,
recognizing their outreach and reputation amongst
Haitian poor communities as an ideal network to quickly
reach affected populations. The ‘Catastrophic Loss
Micro Insurance Pilot’ was conceived using a blended
‘cash-based’ emergency response with a longer-term
product design approach, laying the foundation for future
financial risk reduction programming in Haiti and lessons
learned for similar situations regionally and globally. This SERBIA – JACKIE LEE/MERCY CORPS

pilot focused on the highly earthquake affected area

of Leogane – the epicenter of the earthquake – and
surrounding areas which were over 90% destroyed.
Fondasyon Kole Zépol (Fonkoze) is Haiti’s largest, most
innovative micro-finance institution with over 200,000
clients. It operates 41 branches across Haiti and in every
province of the country, including many towns and villages
where no commercial banks operate. It is the institution
on which Haiti’s poor have relied on, especially during
crisis, since 1994.
For 30 years, in the midst of economic collapse,
political transitions, armed conflict, and natural disasters,
Mercy Corps has been helping millions of individuals,
families and communities turn crises into opportunities
for sustainable, positive change.
II. Catastrophic Loss Micro Insurance
Pilot
Catastrophic micro insurance would be triggered
following a natural disaster or if a specific percentage
of the population in an area lost their business due to
a common destabilizing event. If this insurance product
had been in place on the 12th of January 2010, Fonkoze
clients would be entitled to:
• Clearance of the balance of their existing loan;
• 5,000 HGT cash grant as part of an insurance
pay-out to cover any immediate needs of the
family (exchange rate approximately 39 HGT/ $1
USD); and
• Eligibility for a new loan, not to exceed the
amount of their last loan.
In the short term, the micro insurance pay-out would
enable clients devastated by the earthquake to cover
their family’s immediate needs while supporting small
business re-start. An intensive educational program re:
the benefits of micro insurance and a market study to
determine people’s understanding and willingness to pay
for micro insurance in the future were conducted as a
means to design an appropriate follow-on program.
III. Results
• Grant payment made on: 14 March
• First cash out payment made on: 1 April
• Initial target for the pilot: 500 clients subscribed prior to the earthquake
• Number of clients reached: 599
(Overachievement of 99 clients funded by
Fonkoze private funds)
• Total micro insurance pay-out: $64,000
• Total loan cleared: $75,000
• Funding: Mercy Corps private funds
In general, the insurance pay-out was spent on:
1. Material to meet immediate shelter needs of the
family (tent, tarpaulin, etc.)
2. Food and safe drinking water
3. Small trading – merchandise to re-start business
activities
4. Paying off personal debt
To date, 120 clients have taken a new loan. The Issues
raised with regards to new loan uptake:
1. Health reasons (clients report they don’t feel ready
to restart a business)
2. Significant loss of customer base and suppliers
(mostly wholesalers) in PaP
3. Resourceful use of insurance pay-out to restart
small business to meet immediate needs
Following the success of the pilot, funded by Mercy Corps
private funds, Fonkoze will scale the program nationwide
with financial support from the American Red Cross.
Mercy Corps (Global)
Diane Johnson
Global Economic Recovery &
Development Coordinator
djohnson@field.mercycorps.org ksossouvi@ht.mercycoprs.org
0510
IV. Challenges
a) Initially, training Fonkoze’s credit agents on
implementation of the pilot. The product is not an
insurance per se, in that clients had actually not
b) Client selection in areas with less earthquake
damage and others not affected by the earthquake
in regards to choosing appropriate criteria,
especially with regards to scale-up.
c) Engaging private sector partners at a reasonable
price point given the current general surge in
insurance pay-outs after the earthquake which
drives premiums up across the board.
d) Further business planning is required to ensure
the financial and commercial sustainability of a
catastrophic loss micro insurance product.
V. Lessons Learned
a) All clients reported being willing to pay for insurance
in the future and suggest that subscription should
be made compulsory (as the conflict on priority
needs may discourage many to subscribe).
b) The 5,000 HTG pay-out amount was deemed
significant in addressing immediate needs.
c) Fonkoze gained significant experience in managing
a catastrophic loss micro insurance scheme and
feels more confident to approach partners to
develop a suitable solution for their clients.
d) There is strong potential to institutionalize
catastrophic loss micro insurance in Haiti as part as
disaster preparedness.
Mercy Corps (Haiti) Fonkoze
Kokoévi Sossouvi Myriam Narcisse
Economic Recovery Program Director Literacy and Education
Manager Program
mnarcisse@fonkoze.org