Microfinance Focus June 2, 2011: IFC, a member of the World Bank Group, and Swiss Re Corporate Solutions recently joined forces to develop new insurance solutions in developing countries. The insurance will cater to farmers and people in agrarian communities, to help ease devastating impacts of natural disasters and weather risks.

The IFC led Global Index Insurance Facility develops products and markets for index-based insurance products in developing markets, where losses resulting from weather and catastrophic events are assigned values on a predefined basis, using an index.

When an event occurs, insurance payments are distributed to policyholders without having them wait for claims to be settled in the traditional way, ensuring needed timely payout, reducing administrative costs, and increasing access to finance for farmers and herders because banks are more willing to lend when they are insured.

The partnership will focus on solutions for the rural sector in Africa, and also consider index-based solutions in other emerging markets. Under the agreement, Swiss Re Corporate Solutions will provide technical services to the Global Index Insurance Facility projects and support strategic objectives in developing risk transfer solutions for emerging markets.

The European Union committed €24.5 million as the first donor to the Global Index Insurance Facility Trust Fund. The fund is also supported by Japan’s Ministry of Finance with an initial grant of $2 million, and the Dutch Ministry of Foreign Affairs, which provided funding to establish the facility.