Paper
Stabilising Community Health Financing Through Re-insurance
Can reinsurance stabilize the financial operation of micro-insurance units?
18 pages
This article examines whether reinsurance can stabilize the financial operation of small community based health schemes (micro-insurance) in low-income settings. The results presented in this study relate to Uganda. Before analyzing the contribution of reinsurance to micro-insurance units (MIUs), the paper suggests a few reasons for the latter's volatility:
- Little or no legal and financial support from governments;
- Low affiliation rates;
- Low and irregular contributory capacity of the members;
- Intense fluctuations in local conditions;
- Competition on outside resources;
- Lack of intrinsic capacity to organize financial transfers with other micro-insurance schemes.
Further, the paper presents:
- Interaction patterns between micro-insurance and the re-insurer;
- A mathematical model for MIU and the types of risks that can be reinsured;
- Unique features of the benefit packages offered by MIUs;
- Distinction between 'insurable' and 'non-insurable' benefits;
- Ways to recognize and overcome the adverse impact of small group-size on financial stability;
- Methods to improve the assessment of risk probability in micro-insurance context.
The paper concludes that:
- Reinsurance can stabilize the long-term financial operation of MIUs;
- Reinsurance may require several years of operation before reaching cost-neutrality;
- It requires improvement in the information and infrastructure base of MIUs;
- A clear distinction must be made between stabilization and financing.
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