Social Re

All development agencies are constantly faced with the challenge of assisting governments to establish viable health financing systems for the poor. Countries with low capacity to collect taxes also spend less on health. Low health spending is also linked to low pooling and insurance arrangements. Additionally, fragmented systems and uncoordinated interventions of many agents lower the health impact and the cost-benefit of these resources. Community-based micro-insurance schemes can enhance the cost effectiveness of health expenditure of the poor provided they are stabilized.

What is Social Re?

Simply defined, reinsurance is the transfer of liability from a primary insurer (the MIU - Micro Insurance Units) to another insurance company (the reinsurer). The transfer of risks to a reinsurer is called cession. Reinsurance activity covers four domains, which are financing, capacity, stabilization, and catastrophe protection; sometimes a fifth domain is added, which would certainly be necessary for MIUs: underwriting and managerial assistance.

The Role of Social Re

Social Re aims to provide an instrument for financial stabilization. Lets be clear on this; Social Re does not provide health services — that is left to the market or Government; social re does not provide health insurance — that is left to the MIU . Social Re stabilizes the MIUs that provide the insurance that enables health care services to be accessed.The Social Re project sets out to model, pilot and assess the viability of applying risk-pooling insurance & reinsurance tools at the level of micro healthinsurance schemes, by covering their outlier risks/costs. This is expected to increase the credibility of micro-insurance schemes, increase the share of their revenues that are pooled, and offer risk management tools that are unavailable at this level at present. The idea of developing Social Re is designed to complement, not compete with, governmentfinanced systems. Interest in this idea is founded on the consensus that developing risk- management tools for this sector is a new, unexplored option that may contribute to extending coverage among the excluded. The idea has initially been examined through scientific modeling and simulation. The next stage will be to test the concept under real-life conditions, in one or more pilot locations.

The Need of Social Re

Micro-insurances need Social Re. The objective of micro-insurance units (MIUs) is to extend coverage to excluded people. Being voluntary schemes, MIUs can attract membership, and thus fulfill their objective, if they can ensure stable operations even under “worst case” scenarios. To do so, MIUs need to cover their outlier risk by reinsurance. This reinsurance facility does not exist at present for communitybased health schemes, and the Social Re project aims to pilot such risk transfer for the first time. The main objective of Social Re will be to cover risk where otherwise the MIUs might have defaulted on their obligations, or otherwise lower their services unexpectedly, in catastrophic cases. By providing more financial stability to the MIUs, Social Re will contribute to their ability to operate more credible insurance schemes. Social Re will thus help to extend coverage to excluded populations by making MIUs more reliable agents of social protection.

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