Identifier
Created
Classification
Origin
05ROME2226
2005-07-01 13:48:00
UNCLASSIFIED
Embassy Rome
Cable title:  

POVERTY INSURANCE: ROME-BASED AGENCIES AND PERMREPS

Tags:  EAID EAGR SENV UN FAO 
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011348Z Jul 05
UNCLAS ROME 002226 

SIPDIS


FROM U.S. MISSION IN ROME

STATE FOR IO/EDA SKOTOK
USAID FOR DCHA, OFDA GOTTLIEB, MMARX; FFP LLANDIS

BRUSSELS FOR PLERNER/USAID
GENEVA FOR NKYLOH/USAID

E.O. 12958: N/A
TAGS: EAID EAGR SENV UN FAO
SUBJECT: POVERTY INSURANCE: ROME-BASED AGENCIES AND PERMREPS
DISCUSS EUROPEAN THINK TANK'S PROPOSAL


UNCLAS ROME 002226

SIPDIS


FROM U.S. MISSION IN ROME

STATE FOR IO/EDA SKOTOK
USAID FOR DCHA, OFDA GOTTLIEB, MMARX; FFP LLANDIS

BRUSSELS FOR PLERNER/USAID
GENEVA FOR NKYLOH/USAID

E.O. 12958: N/A
TAGS: EAID EAGR SENV UN FAO
SUBJECT: POVERTY INSURANCE: ROME-BASED AGENCIES AND PERMREPS
DISCUSS EUROPEAN THINK TANK'S PROPOSAL



1. Summary: On June 29, 2005, the Italian Committee of the Thomas
More Institute hosted a conference at the United Nations (UN)
Food and Agriculture Organization (FAO) on poverty insurance,
entitled "Reinsurance: A New Key to Development Aid." French
academic Michel Vate was the featured presenter, while one expert
from each of the Rome-based food agencies FAO, World Food
Programme (WFP),and the International Fund for Agricultural
Development (IFAD) participated in a roundtable discussion on
current insurance schemes to reduce poverty. The central premise
was that economic insecurity caused by natural or other shocks is
a major contributor to underdevelopment, and that insurance and
re-insurance mechanisms supported by development aid and private
investors could help the poor manage such risks. U.S. Ambassador
Tony Hall, along with his counterparts from France and the United
Kingdom, provided closing remarks in which they welcomed
innovative ideas for tackling poverty and underdevelopment, but
questioned the specifics of Vate's proposal. End Summary


2. Background: The Thomas More Institute is an independent
European think tank based in Brussels and Paris, which aims to
provide a forum for innovative ideas and solutions to the world's
current and future problems (for more information, refer to
www.institut-thomas-more.org). On June 29, 2005, the Italian
Committee of the Thomas More Institute hosted a conference at FAO
on poverty insurance, entitled "Reinsurance: A New Key to
Development Aid."

-------------- --------------
Conference Participants
-------------- --------------


3. Despite the fact that June 29 is local holiday in Rome (Saints
Peter and Paul day),the conference was fairly well attended by
foreign representations (mainly African) as well as international
organizations and even a clergyman. Romualdo Bettini, Italian
Ambassador to the UN agencies in Rome gave opening remarks, while
Gustavo Selva, President of the Foreign Affairs Committee of the
Italian Chamber of Deputies, provided the introduction.
University of Lyon Professor Michel Vate's featured presentation

on "Reinsuring the Planet: Towards a Pro-poor Financial
Globalization" was followed by a roundtable discussion by experts
from each of the Rome-based food agencies: FAO, IFAD and WFP.
U.S. Ambassador Tony Hall, along with his counterparts from the
United Kingdom and France, ended the conference with closing
remarks.

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What is Poverty Insurance?
-------------- --------------


4. As major disasters due to climatic or geologic changes tend to
occur at measurable frequencies, international finance and
humanitarian organizations have teamed up recently to come up
with alternatives in providing aid to affected countries as a way
to mitigate risks. The effort has lead to a mechanism called
poverty insurance, also interchangeably known as hunger or
weather insurance. Poverty insurance aims to alleviate the
economic stress caused by disaster by insuring against the event.
The concept is similar to the hurricane/weather/crop insurance
schemes found in developed nations. Insurance helped support
development in countries in the north, but the poverty faced by
many countries in the south is an impediment for insurance,
either because the poor cannot afford the premiums or there is no
financial system in place to support an insurance scheme.
Academic experts, economists and humanitarian practitioners are
working together to come up with poverty reduction insurance
mechanisms that are either fully or partially financed by capable
entities (i.e., donors, host nations, or developing nation
constituents themselves).

-------------- --------------
Michel Vate and "Planet Re" on Reinsuring the Planet
-------------- --------------


5. French academic Michel Vate explained that "Planet Re" is a
global pyramid with millions of the world's poor threatened by
poverty at its base. At the top are the major international
organizations like the World Bank, the International Monetary
Fund, the European Union and UN agencies like FAO. Small
premiums paid by the poorest at the bottom of the pyramid and
managed by the international associations and major insurance
companies at the top of the pyramid could lead to the creation of
an insurance system in the interest of the world's neediest. It


would be a "hand-up" approach to aid rather than a "hand-out."
According to Vate, more risk sharing and risk transfer will
alleviate the need for public aid. Thus, his "Planet Re" concept
is risk insurance in the interest of development, which restores
capacity lost during a disaster. (For more information, please
refer to http://www.institut-thomas-more.org/pdf/1en
NoteITM1Vatev2Eng.pdf.) Vate distanced himself from controversial
proposals for a global tax on capital transactions to finance a
global poverty insurance scheme, but was not precise on where the
funding would come from, or how such scheme would be managed.

-------------- --------------
Roundtable Discussion by Rome Experts
-------------- --------------


6. Economists and rural finance experts from FAO, IFAD and WFP
offered their views on current schemes from each of their
agencies as follows:

-- The director of FAO's commodities and trade division, an
economist by training, covered vulnerability issues related to
commodity shocks in least developed countries. He noted that
there is a form of self-insurance in developing countries, for
example, investing in livestock or gold, but that there is also a
high demad for harvest insurance. For instance, coffee farmers
in Tanzania are willing to pay up to 800 Tanzania shillings for a
crop premium. FAO is working on an idea for a "Global Commodity
Insurance Facility" to develop a fund for low-income commodity
deficit countries to purchase insurance contracts. This is
broadly based on the "Global Index Insurance Facility," which has
recently received $100 million in pledges by the European Union
and development banks. FAO is helping to provide technical
backstopping on the Global Index Insurance Facility.

-- A senior rural finance adviser from IFAD discussed micro-
insurance and how it reinforces micro-finance. IFAD is working
with the world's top micro-finance institutions to extend micro-
finance opportunities, such as providing savings and credit as
well as insurance services, to the rural poor. According to
IFAD, when the rural poor people have access to credit, savings,
insurance and basic financial services they can better manage
their assets and generate income. IFAD is currently conducting
micro-insurance projects in Mexico and Morocco.

-- A WFP food security and early warning adviser gave a brief
overview on the WFP weather insurance project to be launched in
Ethiopia. The speaker, who was born in the countryside where the
WFP project will focus, noted the need for such a venture where
there are limited options. He said that many Ethiopians have yet
to recover from the devastating impact of the 1984-85 drought,
which if it occurred today would cost the world $1.6 billion in
aid. The WFP program aims to protect whatever development has
been accomplished through conventional donor funding.
Recognizing the importance of this scheme, the Government of
Ethiopia is participating by providing rainfall data on which the
insurance scheme will be based.


7. Questions from the audience related to external financing
(Vate clarified that his scheme would not be financed through
international taxation but rather through private investment);
and bridging the gap between micro-insurance and macro-insurance,
(which would depend on the transmission mechanism, whether it be
through a bank, a government entity, or international
organization, such as WFP). The Sudanese Ambassador inquired as
to how poverty insurance could be applied to Sudan. Vate
responded that, without political will, it is difficult, and
stated that big actors, including the Government of Sudan and
international donors, can begin on a smaller scale by funding
smaller, more specialized insurance schemes.

-------------- --------------
Closing Remarks Session
-------------- --------------


8. U.S. Ambassador Tony Hall, UK Ambassador Matthew Wyatt, and
French Ambassador Charles Millon provided closing remarks.
Ambassador Hall thanked the conference planners and participants
for providing a forum in which innovative ideas and tools to
combat poverty and hunger could be discussed, but noted that many
questions still remain on this issue, for example, how the poor
can be kept in the loop on financing this scheme. He highlighted
the U.S. position that good governance is key to enabling a
favorable climate for development, and noted that all governments


have the singular responsibility to ensure the well being of
their people. Both Ambassadors Wyatt and Millon echoed the good
governance remarks. Wyatt called for more information on how
poverty insurance will affect social protection schemes, while
Millon stated that insurance can help push development forward.
All thanked the experts for providing as simple an overview as
possible on a technically complicated concept.

Hall


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2005ROME02226 - Classification: UNCLASSIFIED