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thumb an insurance company needs to

comparison. One wrong strategic decision can put in motion an almost irreversible chain

have a certain percentage of its overall

reaction of following disasters, with limited means available for remedial interventions.

risk exposure ready in the form of accessible capital, normally put together by

From a developmental perspective the mutual insurance scheme easily appeals closest

equity and retained earnings. This varies

to a widely shared empathy for people-focused and empowering forms of insurance. It

from country to country, but often at least

is as close as one can get to formalised self-insurance. Members are owners, allowing for

a third of the risk underwritten should be

people rather than shareholder focussed priorities in business operations, and it starts

backed-up that way. The pressure to fiddle

with mustering people’s own interests and resources for the well-being of the group or

around with this rule can be great.

community at large.

Affiliates may not appreciate their earnings from profits being retained, there is the

Yet, the pitfalls are many and what may have gone well over a considerable period of

pull of bringing part of the capital to

time, can be brought down in no time by over-ambitious management, poor governance,

places where higher returns can be

self-interest from affiliate groups, backlogs in premium collection, ignoring government

achieved, such as in stock markets, and

regulations or, fair and square, not heeding to the basic principles of insurance prudence

there can be pressure to invest parts of

for a wide range of other interests.

the capital in new buildings or for financing

An issue for further investigation would be to look in the diversity of regulatory systems. In quite a few countries microfinance and microinsurance institutions are supervised by the Central Bank or the Ministry of Finance, unless they take a co-operative form. Memberbased service providers may be exempted from supervision as they do not service the ‘public at large’, or are being mildly looked over by a Ministry of Co-operatives. 18

of temporary operational losses. What

All the more reason to have a look at what the support industry can do promote and

affiliates moreover may have a problem

sustain the emerging microinsurance sector.

with is putting up more capital to allow for growth of the operations. If adequacy levels have been pushed to their limits, the company can not write more policies, unless more capital is brought in.18 To a certain extent, the same pitfalls can be found in the microfinance industry, but this ICMIF document shows that the margins in microinsurance are smaller in


Micro-insurance.indd 34-35


7/4/05 4:44:06 PM

Microinsurance brochure  

Microinsurance brochure

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