MILK Brief #15: Doing the Math - Catastrophe Insurance in Haiti

Each hurricane season in Haiti threatens to erase the fragile progress made since the 2010 earthquake, and small business owners are among the most vulnerable. MILK partnered with the microfinance institution Fonkoze to explore the value of its Kore W catastrophe insurance in helping clients cope with the consequences of a flood. The product, which is mandatory for Fonkoze borrowers, covers any outstanding loan balance, provides a cash payout of USD125, and preapproves clients for a new loan. We interviewed insured (some of whose claims were rejected and some approved) and uninsured small business owners in the wake of a 2011 flood to understand the costs they incurred and how they coped. We find that while the insurance payout covered only a small portion of the total losses, in combination with continued access to credit it was instrumental in helping clients to begin the recovery process. Long delays in claims payment (which Fonkoze has since begun to improve but remain long due to the product's design) led clients to undergo difficult financing strategies while waiting for the insurance benefit.  Nonetheless, the Kore W product helped many clients to avoid selling assets as many of the uninsured were forced to do.