Stabilising Community Health Financing Through Re-insurance

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.