United approach

United approach

A shared vision that the re/insurance industry has a responsibility to help advance economies in some of the less developed parts of the world was the key driver between eight market leaders joining forces and launching a new microinsurance venture.

The as-yet unnamed operation was unveiled during the World Economic Forum’s annual meeting in Davos back in January, and the project aims to launch 10 microinsurance ventures over the next decade. These projects will be established via a microinsurance consortium as well as a microinsurance venture incubator (MVI).

The consortium itself consists of AIG, Aspen Insurance Holdings, Catlin Group, Guy Carpenter along with its parent company Marsh & McLennan Companies (MMC), Hamilton Insurance Group, Transatlantic Reinsurance Company, XL Group and Zurich Insurance Group.

Guy Carpenter’s global chief economist and risk strategist, Joan Lamm-Tennant, will head up the Bermuda-based MVI as its chief executive, although she will be based New York.

Alexander Moczarski, the president and CEO of Guy Carpenter and chairman of MMC International, will serve as the MVI’s chairman, while Mario Vitale, Aspen Insurance’s CEO and president of Aspen US Insurance, is vice chairman.

“It began with a shared vision and that’s what brought these eight industry leaders to the table,” explained Lamm-Tennant.

“Over time, they developed a very consistent vision that managing and financing risk was intrinsic to the success of a society. We know having a successful society is about health, education and access to financial services and by that I mean credit banking and the ability to finance risk.

“We think the microinsurance market is significant and it will create opportunity, not just for enhancing premium volume, but also to think differently about how you approach and open a market. We must innovate to succeed in this market, and then reverse innovate into our existing businesses. So we’re actually seeing it as an opportunity to learn.”

As explained during the launch in Davos, the MVI has been formed to create markets that protect against some of the risks faced by those in developing countries. It is hoped the MVI will deliver risk protection to those that are currently underserved in these markets.

The MVI will support the launch and operations of a portfolio of microinsurance ventures around the world. These ventures will provide the business services necessary to achieve scale and profitability in the markets they serve, and will include the creation of unique distribution methods, local partnerships and product development, as well as formulate a method of assessing the impact they have on the local society.

While the first of the 10 microinsurance ventures is scheduled to go live by the end of this year, it is not yet known exactly what form it will take with the participants currently in the process of deciding upon what structure it will take.

The MVI is focusing on several regions of the world where those involved can use their knowledge and expertise to provide protection to that market and also enable them to develop further.

Through technology-enabled platforms, the MVI has been designed to advance the role of insurance in various developing countries in Latin America, Africa and Asia.

“We’ve done a lot of groundwork in Latin America but we’re very anxious to reach Africa, and we intend to be very broad based, and that’s why we’re focused on building a portfolio of 10 ventures,” Lamm-Tennant explained. “We envision the MVI as an incubator which will develop turn-key, cost efficient ventures enabling carriers to enter the market with risk capital. Initially we may develop these ventures with local venture partners, although eventually a greenfield approach is possible.

“The MVI is also establishing strategic partnerships that can be leveraged across the local ventures. We are currently in discussion with potential strategic distribution and technology partners as well as strategic partners who would provide social impact services. Because we are a consortium, our ability to form partnerships is strengthened.”

Part of the thought behind the creation of the MVI is to help those in developing economies, but the eight companies that have signed up to the project would not have done so if they thought their involvement would not be profitable. The insurance industry has a checkered history when it comes to microinsurance initiatives, and Lamm-Tennant said the eight participants are well aware that some of the ventures may not be successful.

“One of the reasons why there’s been a challenge to date is firms enter a market with one product, and it has a chance of succeeding, but also one of it not succeeding. If it fails, the firm tends to back away, so we intend to go in with a long term commitment on a portfolio.

“We were able to make the numbers work for us to sustain this initial venture with the expectations that some of them won’t succeed. There is not a 100% success ratio here, but it’s not necessary. What’s unique about this is that we are building a portfolio of 10 ventures. We are able to afford sustainability even if a few do not get scale. We understand that, so we will appropriately calibrate the risk and the impact of our first venture.” 

By Christopher Munro – christopher.munro@euromoneyplc.com

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