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
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