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Kore W – Catastrophe insurance for microfinance clients

About the Project
Project start date: 
Dec 2010
2 years
Country of Operation: 
Region of operations: 
Latin America and the Caribbean
Project Thematic Focus: 
Insitutional models and business processes

Project Basics

Since a series of devastating hurricanes struck Haiti in the autumn of 2008, Fonkoze has worked to develop natural disaster coverage at a price affordable to the poorest of their microfinance clients. Their product is called “Kore W”.

Kore W is catastrophe insurance coverage for Fonkoze's approximately 60,000 microcredit clients, particularly those in the Solidarity and Ti Kredi programmes. This coverage is meant to protect small entrepreneurs in the event of earthquakes, floods, hurricanes or other wind events. The product is mandatory for all clients when they take out a loan and the premium for most clients is 3 per cent of the loan's principal. In the event of a natural disaster, approved clients are eligible for a US$125 indemnity payout, the cancellation of their loan with Fonkoze, and the right to take out a new loan as soon as they are ready. Kore W operates through MiCRO, a catastrophe insurance company based in Barbados. MiCRO provides index coverage (through Swiss Re), which is triggered in large-scale catastrophes (earthquake, wind and rain), as well as basis risk coverage for smaller events that affect Fonkoze's clients.

To reduce the basis risk inherent in any index products, a rapid loss assessment is expected to be implemented that utilizes Fonkoze’s already established network of credit centres and centre chiefs. When a large natural disaster occurs, Fonkoze’s centre chiefs immediately begin assessing client damage in their centres and reporting this information to the 46 branches, who in turn notify the Kore W team at the central office. Within a few days, the Kore W team will assemble a team of certified facilitators who visit the scheduled two-weekly centre meetings. During these meetings, facilitators organize discussions between all members in order to verify damage information, determining which clients qualify for payouts.

Technology is being introduced to improve the efficiency and reliability of the processes, from enrolment to claim settlement. Using a specially designed insurance module which integrates with Fonkoze’s financial management software, this technology allows the organization to better manage the link between credit and insurance products by automating registration and the collection of premiums. Another component will help identify clients and make the service faster and more efficient.

Fonkoze is including an intensive client education programme during the rollout phase of the project, to explain the product’s benefits to clients. Fonkoze’s credit centre chiefs have been trained to facilitate the process of assessing losses after a natural disaster.

Date of last Learning Journey update: September 2012