Micro-insurance – Hedging against livelihood risks

Many people in developing and transition countries live without any formal means of protection against risks, such as illness, death, harvest failure, loss of personal effects or loss of income.  The right insurance services can minimise the social and economic impact of such unexpected hardships.

The SDC's focus

The SDC supports the development of innovative insurance services for poor sections of the population.  It makes sure that such services are based on the principles of solidarity, act as a supplement to state social security systems, and are adapted to the financial capabilities and traditional norms of the community in question.  With this in mind, the SDC works closely with local and international partners, and in particular with companies in the private sector. The main areas are:

  • Support for commercial and non-commercial providers of insurance services in developing new products, distribution strategies, co-operative ventures and alliances etc., with the aim of providing poor client groups with sustainable access to financially affordable services
  • Support for co-operatives and self-help groups in setting up and developing insurance systems
  • Support for training various actors: governments, the insurance sector, civil society and (potential) client groups


Only 5–10% of people in developing countries have formal insurance against the wide range of risks to which poor people are particularly exposed.  To avoid the slide into debt and even greater poverty due to illness and accident, loss of income, natural disasters or the loss of property, it is important to set up services that help poor people to manage risks more effectively and be compensated for any such setbacks.

Because state safety nets are often non-existent in SDC partner countries, micro-insurance systems are growing in importance.  The idea behind such systems is to offer people living in precarious conditions a degree of protection.  This is done by providing collective risk cover based on traditional insurance principles but adapted to meet the needs of the poor.  Typical services are usually geared to a defined geographical area or social group, and funded by relatively small policyholder contributions.

Although the benefits offered by micro-insurance are limited, together with the possibility of regular saving they offer an important means of overcoming crises without any permanent loss of income or accumulation of debts.  Savings and micro-insurances can help to improve the economic and physical capabilities of people affected by crises and their families, and make a significant contribution to preventing poverty.

Current challenges

The development and spread of micro-insurances is still in its infancy. Despite encouraging experiences acquired through relatively simple approaches, such as credit insurance, the widespread, cost-effective provision of such insurances to poor sections of the population poses a major challenge. In addition to designing an appropriate structure for the service range, risk management and ensuring the profitability of services, the focus is on developing effective sales networks and building/expanding institutional providers. Protection against agricultural risks (harvest failure, cattle disease) and disasters pose special challenges. It is also important that micro-insurance systems be integrated in an overall social security system over the medium term. Additional tasks include the creation of favourable framework conditions and co-operation with international insurance providers, among other things with a view to reinsurance.