Global Index Insurance Facility (GIIF)
An innovative IFC-led program is expanding access to index-based insurance for natural disasters and weather risks in developing countries.
Insurance providers in Africa and other developing regions rarely offer the hazard insurance familiar to industrialized countries. Earthquake, flood, and hurricane victims often lose their homes in an instant, recovering none of their assets or investment unless they are fortunate enough to be part of a donor-funded disaster relief program. Likewise, droughts can wipe out the crops or livestock that farmers rely on for income.
IFC, together with the International Bank for Reconstruction and Development (IBRD), also a member of the World Bank Group, has established the Global Index Insurance Facility (GIIF) to address this problem. GIIF takes an innovative index-based approach to insurance that aims to expand access to insurance products in developing countries, and particularly to farmers and people in agrarian communities.
The European Commission (EC) committed €24.5 million as the first donor to the GIIF Trust Fund, the key advisory program. The EC is the primary donor to the initiative’s related advisory services and capacity building program, providing substantial funding to build local partners’ skills and support the regulatory environment, product development, and specific risk transfer projects in African, Caribbean, and Pacific Island countries. The Trust Fund, also supported by the Dutch Ministry of Foreign Affairs, through the NIPP partnership with IFC, will focus on building local partners’ skills and on working with governments and regulators.
Working with GIIF
IFC and its partners in GIIF would like to work with local insurers and financial institutions, as well as regulatory bodies and organizations from the private sector to build capacity and a suitable regulatory and commercial environment for index-based insurance products.
More information on working with GIIF and current opportunities.
Index Based Insurance in Action
This index-based approach to insurance has been successfully piloted by a number of World Bank pilot projects preceding this project, including WBG initiatives in Malawi, India, and Mongolia.
In Malawi, drought insurance is sold to small-scale peanut farmers with loans for high yield seeds. If rainfall does not meet historical averages, the farmers receive an insurance payment. Banks provide loans for high yield seed to the farmer only if insurance is bought mitigating the risk for both the farmer and the lender.
In India, indexed weather insurance is being sold by several providers to farmers, including, Basix, a microfinance institution and AIC, the state agricultural insurer. In 2003, 250 farmers were insured and by 2007 around 700,000 farmers were estimated to have bought policies.
In Mongolia, indexed livestock insurance is being provided based on local livestock mortality rates. Policies are sold in the spring, before the quality of the pasture gives herdsmen an indication of expected deaths that year. If the annual mortality rate is above average, the insurance policy pays, regardless of the number of livestock deaths a farmer incurs. If the mortality rate is below average, no payout is made.
Resources
Global Index Insurance Facility Brochure
Global Index Insurance Facility Presentation
Martin Buehler | MBuehler@ifc.org | T: 202- 458-7553
Peter Maina | PMaina@ifc.org | T: + 27 11 731 3223
Olivier Mahul | OMahul@worldbank.org | T: 202-458-8955
