WorkingPaper

AnExploratoryAnalysisintoUrbanIndex-basedMicroinsuranceforFloodRiskinNairobi:Acommunity-basedapproach

PatrickTarbuckKingsCollegeLondon

12/01/2018

PATRICK TARBUCK ii

Abstract Climate change continues to amplify vulnerability in low-income communities across Nairobi, with many urban livelihoods at great risk to the impacts of flooding. This study explores the scope for index insurance in Nairobi for flood risk at the micro-level. Drawing from relevant academic literature, this paper considers the role of social capital and trust as an analytical framework for studying the interactions between the community and institutions for managing flood risk. Thus, the role of social capital and trust in improving accessibility, availability and inclusiveness of insurance will form the analytical framework around which the thesis of this dissertation will be based. 17 individuals from flood-prone areas in Nairobi, alongside 12 key informants from relevant organisations were interviewed. Through a contextual comparative analysis, this dissertation found that trust and capacity building play a dominant role in providing an enabling environment and creating a demand for IBMI.

PATRICK TARBUCK iii

Table of Contents

Title…………………………………………………………………………………………………... i Abstract………………………………………………………………………………………………. ii

Table of Contents……………………………………………………………………………………. iii

List of Acronyms…………………………………………………………………………………….. v

Key Definitions………………………………………………………………………………………. vi

List of Figures…………………………………………………………………………………........... vii

1. Introduction……………………………………………………………………………………….. 1

2. Rationale for Research…………………………………………………………………………… 3

2.1 Introduction......................................................................................................................... 3

2.2 Climate Risk in Nairobi………………………………………………………………….. 4

2.3 Index Insurance…………………………………………………………………………… 7

2.4 Challenges and Limitations………………………………………………………………. 9

2.5 Mutual Microinsurance…………………………………………………………………… 10

2.6 Social Capital and Trust…………………………………………………………………... 11

3. Methodology……………………………………………………………………………………..... 15

3.1 Overview………………………………………………………………………………….. 15

3.2 Semi-Structured Interviews………………………………………………………………. 15

3.3 Positionality………………………………………………………………………………. 16

3.4 Sampling Methods………………………………………………………………………... 16

3.5 Secondary Data…………………………………………………………………................ 18

3.6 Challenges………………………………………………………………………………… 19

4. Results and Discussion …………………………………………………………………………… 20

4.1 Introduction……………………………………………………………………………….. 20

4.2 Trust………………………………………………………………………………………. 21

4.2.1 Communal Culture and Practices………………………………………………. 21

4.2.2 Informal and Formal Trust-Building………………………………….................. 23

4.2.3 Enabling Environment for Mutual Microinsurance………………………………. 24

4.3 Capacity Building…………………………………………………………………………… 26

4.3.1 Community Perception and Awareness…………………………………………... 26

4.3.2 Affordability and Accessibility…………………………………………………… 27

PATRICK TARBUCK iv

4.3.3 Building an Insurable Population…………………………………………………. 29

4.4 Technical Input……………………………………………………………………………… 30

4.4.1 Infrastructure……………………………………………………………………… 30

4.4.2 Stakeholders………………………………………………………………………. 31

4.4.3 Transformative Technology………………………………………………………. 32

5. Conclusion…………………………………………………………………………………………… 33

Reference List…………………………………………………………………………………….......... 35

PATRICK TARBUCK v

ListofAcronymsACREAfrica–AgriculturalandClimateRiskEnterpriseAfrica

ARC–AfricanRiskCapacity

CBII–Community-basedIndexInsurance

CCA–ClimateChangeAdaptation

CIC–CooperativeInsuranceCompany

CSR–CorporateSocialResponsibility

DFID–DepartmentforInternationalDevelopment(UK)

DRR–DisasterRiskReduction

DRM–DisasterRiskManagement

G7–Groupof7

GDP–GrossDomesticProduct

IBLI–Index-basedLivestockInsurance

IBMI–Index-basedMicroinsurance

ICMIF–InternationalCooperativeandMutualInsuranceFederation

INGO–InternationalNon-governmentalOrganisation

IPCC–IntergovernmentalPanelonClimateChange

IRA–InsuranceRegulatoryAuthority

KDI–KounkueyDesignInitiative

NGO–Non-governmentalOrganisation

SDGs–SustainableDevelopmentGoals

SDI–SlumDwellersInternational

SWM–SolidWasteManagement

TIA–TakafulInsuranceAfrica

UN–UnitedNations

UNFCCC–UNFrameworkConventiononClimateChange

UNISDR–UNInternationalStrategyforDisasterReduction

UrbanARK–AfricanRiskKnowledge

PATRICK TARBUCK vi

KeyDefinitionsCapacity

Thecombinationofallthestrengths,attributesandresourcesavailablewithinanorganization,community

orsocietytomanageandreducedisasterrisksandstrengthenresilience(UNISDR,2009).

DisasterRiskManagement

Disasterriskmanagementistheapplicationofdisasterriskreductionpoliciesandstrategiestoprevent

newdisasterrisk,reduceexistingdisasterriskandmanageresidualrisk,contributingtothestrengthening

ofresilienceandreductionofdisasterlosses(UNISDR,2009).

DisasterRiskReduction

Disasterriskreductionisaimedatpreventingnewandreducingexistingdisasterriskandmanaging

residualrisk,allofwhichcontributetostrengtheningresilienceandthereforetotheachievementof

sustainabledevelopment(UNISDR,2009).

IndexInsuranceIndexinsuranceisarelativelynewbutinnovativeapproachtoinsuranceprovisionthatpaysoutbenefits

onthebasisofapredeterminedindex(e.g.rainfalllevel)forlossofassetsandinvestments,primarily

workingcapital,resultingfromweatherandcatastrophicevents,withoutrequiringthetraditionalservices

ofinsuranceclaimsassessors.Italsoallowsfortheclaimssettlementprocessestobequickerandmore

objective(IFC,n.d).

Microinsurance

Microinsuranceisaformofinsurancethatisaimedatprovidingeasieraccessibilityandaffordabilityforlow

incomehouseholdswithinsuranceagainstnaturaldisasters(UNFCCC,n.d).

Mutual

Amutualisanautonomousassociation/organisationoflegalentitiesorpersonsoperatingin(and

sometimesacross)differentsectors,includinghealthcare,banking,insuranceandmanyothers.The

primarypurposeofthemutualistosatisfyitsmembers’commonneeds,ratherthantomakeprofitsor

provideareturnoncapital.Mutualorganisationsarerunforthebenefitofitsmember-owners,asopposed

tobeingownedandcontrolledbyoutsideinvestors(SwissRe,2016).

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Resilience

Theabilityofasystem,communityorsocietyexposedtohazardstoresist,absorb,accommodate,adaptto,

transformandrecoverfromtheeffectsofahazardinatimelyandefficientmanner,includingthroughthe

preservation and restoration of its essential basic structures and functions through risk management

(UNISDR,2009).

Risktransfer

Theprocessofformallyorinformallyshiftingthefinancialconsequencesofparticularrisksfromoneparty

toanother,wherebyahousehold,community,enterpriseorStateauthoritywillobtainresourcesfromthe

otherpartyafteradisasteroccurs,inexchangeforongoingorcompensatorysocialorfinancialbenefits

providedtothatotherparty(UNISDR,2009).

Vulnerability

The conditions determined by physical, social, economic and environmental factors or processeswhich

increase the susceptibility of an individual, a community, assets or systems to the impacts of hazards

(UNISDR,2009).

ListofFigures

Figure1(pp.5)–Graphillustratingtheeconomicimpactofanaturaldisasteronhouseholdswithdifferent

assetpositions(Skeesetal,2006:pp.4)

Figure2(pp.7)–Insurancedensityandpenetrationinemergingmarkets,2016(SwissRe,2017:pp.37)

Figure3(pp.8)–Thepromotionalfunctionofclimateriskinsurance(Whalley,2016:pp.12)

Figure4(pp.13)–DimensionsofSocialCapitalattheCommunityLevel(Woolcock&Narayan,2006:pp.9)

Figure5(pp.16)–MappingtheApril2016FloodingfromOnlineSources(Taylor,2016)

1.Introduction

Therehasbeenanincreaseinextremeweathereventsoverthepasttwentyyears,withover4.4

billionpeopleaffectedand1.3millionkilled(UNISDR,2013;Ana-Gonzalez&vonDahlen,2015).

WhilstDRReffortshavehelpedreducelossoflifeoverthepastdecade,lossoflivelihoodsand

assetshaveamplified (Em-dat,n.d.). Sub-SaharanAfrica remainsoneof themostvulnerable

regions to climate change, with an increase in the intensity of droughts and heavy rainfall

providing significant challenges to vulnerable livelihoods in the region (Niang et al, 2014).

Consequently,rurallivelihoodoptionsarebecominglimitedandmanypeoplearemigratingto

urban areas in favour of more diverse and sustainable livelihood opportunities (World

Population Review, 2016; Janzen & Carter, 2013). However, adaptive capacity to extreme

weathereventsinurbansub-SaharanAfricaispoor(Egondietal,2012;KDI,2015;Revietal,

2014)andthereisagrowingneedtobetterprotectpoorurbanlivelihoodsfromtheperilsof

climatechangethroughmoreeffectiveDRM.

Insurancecanprovideasafetynettothosewhoaremostvulnerabletotheimpactsofclimate

change. Specific to climate-relatedhazards, index insurance is aperfect tool toenhance the

progressofDRR,CCAandtheSDGs,asittranscendsthegoalsofallthree.Actingasaformof

socialsecurity,indexinsurancecanprovidefinancialrelieffromtheshockandstressofextreme

or frequentweather events. There is an urgency for greater insurance penetration in developing

countries toenhance riskmanagement strategiesbefore the impactof catastrophicdisasters suchas

floodinganddrought.TherearecurrentlynumerousestablishedprojectsforruralIBMIinSub-Saharan

Africa(Meze-Hauskenetal,2009;Macmillan,2014;Greatrexetal,2015;Whalley,2016),particularlyfor

agriculture such as cover for livestock and crop-yields. ARC for instance, are very prominent here.

However,littlehasbeendonetoprovideindexinsuranceforlow-incomepopulationsinurbanareas.This

lackofsocialprotectionisofgrowingconcern,withthepotentialcatastrophicimpactsofclimatechange

coupledwithexponentialgrowthoftheurbanpopulationinsub-SaharanAfrica.

ThisstudydoesnotaimtotakeattentionawayfromruralindexinsuranceprojectsinKenyaand

coverageshouldbeexpandedacrosssub-SaharanAfricatobetterprotectsmallholderfarmers

fromextremedrought and floods.However, theapplication for index insurance in anurban

contexthasnotbeenreadilyexploredandthisstudyseekstoconceptualizeitsuseforurban

livelihoods.Indexinsurancecanbemoreeasilyappliedtoagriculturallossesinrurallivelihoods,

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ratherthanurbanlivelihoods.Moreover,thenecessarytechnologyinurbanareashasnotbeen

readilyaccessibleuntilmorerecently,whichhasperhapsdiscouragedstudiesofindexinsurance

application for urban livelihoods. This dissertation will seek to explore whether there is an

enabling environment for urban index insurance at the community level for protecting SME

ownersandworkersfromlossofincome.Itwillnotdelvetoodeeplyintothetechnicalfunctions

and requirements needed tomake it work such as funding, premium collection and claims

payments.Furtherstudiesshouldbedonetoexplorethesetechnicalvariabilitiesandexpertise

inrelevantfieldsshouldbeappliedtoreachconclusionsinthisspace.Instead,thispaperseeks

to identifythechallengesofcreatingdemandfor insuranceandscalingupcoverage,withan

analyticalframeworkbuiltaroundtrustandcapacitybuildingrespectively(Woolcock&Narayan,

2006;MladovksyandMossialos,2008;Greatrexetal,2015;Morsink&Guerts,2011).Existing

informalsocialsavingsandrisksharingplatformsinKenyaformthebasisofcommunity-based,

mutualentities.Thus,theroleofmutualmicroinsuranceforaddressingthesechallengeswillbe

consideredhereafter.

This paper will identify relevant case studies of both pilot and established index insurance

schemes inKenya,Bangladeshand India todevelopa framework for analysis.Alongside the

UrbanARKproject,Iwillusequalitativeresearchtoconsiderboththefeasibilityofanddemand

forIBMIinNairobi,Kenya.CasestudiesofmutualandcooperativemicroinsurancefromIndia

and Kenya will be used to develop a conceptual framework for analysis, where ideas and

conceptswillbedrawn fromcomparativestudiesof ruralandurbanschemes.Moreover,an

establishedurbanprojectinBangladesh,setupbyOxfamtoprovidecoverforfloodingthrough

a Meso-level index-based insurance, will be drawn upon to provide parallels of efficacy in

Nairobi.HereIwilluseacomparativecontextualanalysisofcontrastingindex-basedinsurance

methodstobuildaconceptual frameworkaroundwhichtheir impactwillbe individuallyand

collectivelymeasuredacrossacomparativestructure.Inaddition,thispaperseekstoidentify

whethertherecanbeasustainablelong-termbusinessmodelforIBMIindevelopingcountries

as an alternative to the disaster response financial mechanisms implemented by NGOs,

internationalorganisationsandgovernments.

ResearchObjectives

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RO1:Explorethepotentialanddemandforindex-basedmicroinsuranceforfloodriskinNairobi

toprotecturbanlivelihoods.

RO2: Identify the role of mutual microinsurance for the provision of Urban Index-based

microinsurance.

RO3: Investigate the role of trust within the framework of social capital for limiting the

effectivenessofcommunity-basedandmutualmicroinsurance.

2.RationaleforResearch

2.1Introduction

Thissectionofthedissertationprovidesanopportunitytoreviewtheliteratureandhighlight

the gaps in current understanding of the research topic. Five themes will be addressed

throughoutthissection:ClimateriskinNairobi;abackgroundofindexinsurance;challengesand

limitationsof index insurance; a community-based,needs-drivenalternative; and the roleof

socialcapitalandtrustincommunity-based,mutualmicroinsurance.ClimateriskinNairobiwill

beexploredingreaterdepth,withexposuretofloodriskidentifiedasoneofthebiggestthreats

tourbanlivelihoods.Rapidurbanizationandmoreintenserainfallputsthousandsoflivelihoods

atrisk.CopingwiththestressofnaturalhazardsfallsundertheremitofDRMandCCA,butthis

paper also argues for the role of sustainabledevelopment as an integrated approach. Index

insurance is an important risk transfer mechanism to protect, promote and transform

sustainableurbanlivelihoods(Whalley,2016).Overthepastdecade,therehasbeenanincrease

inruralindexinsuranceprojectsacrossthedevelopingworld(Johnson,2013;Meze-Hauskenet

al,2009),butanexplorationintoindexinsuranceforprotectingpoorurbanlivelihoodsisstill

relativelyunfamiliarandidentifyingthefeasibilityofpotentialprojectswillbestudiedinfurther

detail.However,thereareorganizationalchallengesandlimitationstoindexinsurancesuchas

basis risk, transparency and accountability. This paper will review literature on community-

basedalternatives tonegate theseorganizational challenges.Case studieswill beused from

mutualmicroinsurance and community-based initiatives includingUpliftMutual community-

based health insurance in India andMeso-Level index-based flood insurance in Bangladesh.

Thesecasestudieswillprovideinsightintothemulti-facetednatureofindexinsuranceandthe

characteristicsneededtomakecomparableprojectswork.Woolcock’s(1998,2001,&Narayan,

2006) framework for social capital implemented by Mladovksy and Mossialos (2008) for

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measuringcommunity-basedhealthinsurancewillbedrawnupon.Theroleofsocialcapitaland

trustinimprovingaccessibility,availabilityandinclusivenessofinsurancewillformtheanalytical

frameworkaroundwhichthethesisofthisdissertationwillbebased.

2.2ClimateRiskinNairobi

TheimpactsofClimateChangearebeingseenacrosstheworld,butdevelopingcountriesare

recurrently bearing the brunt of these consequences. Extreme weather events continue to

increase in intensity and frequency because of climate change (IPCC, 2012; EM-DAT, n.d.;

Stocker, 2013). Africa is one of themost vulnerable continents to climate change, asmany

countrieshavehighexposureandlowadaptivecapacitytonaturalhazards.Inaddition,rapid

urbanizationacrossSub-SaharanAfricaisamplifyingvulnerabilityatcommunitylevel,through

poorlandmanagementandinformalsettlements(Cutteretal,2012;Pellingetal,2008;Baker,

2012).Heavyrainfallanddroughtshavebeenmorefrequentinthepastthirtytosixtyyearsover

EasternAfrica,whichposesgreatchallengesforDRRandCCAefforts(Niangetal,2014).Bythe

end of the 21st century, many regions will experience ‘1-in-20-year annual maximum daily

precipitationamounts’everyfivetofifteenyears(IPCC,2012:pp.11),with‘moreintensewet

seasons’acrossEastAfrica(Niangetal,2014:pp.1210).

Copingwiththeshockandstressoftheseincreasinglyfrequentweathereventsisputtingastrain

onthealreadywaningfinancialandsocialcapitalinpoorercommunities.Lowandmiddleincome

countrieswitnessgreatereconomiclossesinproportiontoGDPthanhighincomecountriesand

thereisagrowingneedtobetterprotectthelivelihoodsandassetsofvulnerablepeopleagainst

the perils of extreme weather events (IPCC, 2012: pp.7; UNFCCC, n.d; Collier et al, 2012).

Livelihoodsinsub-SaharanAfricaareconstantlyatthreattoclimatechangeandwithmorethan

halftheworld’spopulationlivinginurbanareas(Doig&Ware,2016),effortstobreakthecycle

of riskaccumulationarevital indecreasingvulnerability (Morton,2007;Dodmanetal,2016;

Revi et al, 2014). Urbanisation continues to increase at an exponential rate, particularly in

Nairobiwhichishometo3.5millionurbanresidents.Over2.5millionofthoseresidentscurrently

living in urban slums (World Population Review, 2016),where adaptive capacity to extreme

weatherevents ispoor(Egondietal,2012;KDI,2015;Revietal,2014).Heavyrainfallacross

Nairobi in April 2016 displaced thousands of people and provided a stark reminder of the

catastrophicnatureoffloodingandthesignificanceofbuildingurbanresilience(Davies,2016;

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Taylor,2016).Blockeddrainagesmean intensefloodinganddestructionto infrastructurecan

causewaterscarcityandspreadofdisease,whichspreadsrapidlyacrossurbanslums.Therisks

associatedwithheavyrainfalldrasticallylimitstheadaptivecapacityofpeoplelivinginurban

slumsandtheirabilitytorecover(Baker,2012:pp.39).

Figure1.AdaptedfromCarteretal(2005)bySkeesetal(2006)toillustratetheroleofindexinsuranceforprotecting

assetsafteranextremeweatherevent.

Inform(2017)indicateshighphysicalexposuretofloodriskinKenyaandbetween1990and2004

over2millionpeoplehavebeenaffectedbyfloodingacrossthecountry(KDI,2015;Jhaetal,

2012).Climatechangecoupledwithrapidurbanisationhasputthousandsofhouseholdsatrisk

to flooding,particularly alongside rivers inNairobi,where rent is cheaper (KDI, 2015).Many

vulnerable communities do not have access to the necessary social protection from natural

hazardsformanagingdisasterrisk(Wisneretal,2004;Collieretal,2012),whichplacespressure

onhouseholdstofallbackonexistingfinancialandsocialassetstoliftthemselvesoutofcrisis.

Intheaftermathofadisaster,householdsfallbackonamultitudeoffinancialandsocialcoping

strategiessuchas:mobilisinghouseholdlabour;reducingexpenditure;sellingassets;consuming

stocks and savings; and borrowing food from friends and family (Adger et al, 2009; Smit &

Wandel,2006;WorldBank,2010).Onetoolformanagingtherisksofdisastersandrelievingthe

burdenofdebtindevelopingcountriesismicroinsurance(Janzen&Carter,2013;Skeesetal,

2006;Carteretal,2005;seeFigure1).

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TheSendaiFramework(UNISDR,2015)andCOP21(UNFCCC,2015)bothcitetheimportanceof

insuranceforenhancingDRRandCCAeffortsindevelopingcountries.EmergingoutofCOP21,

theG7Insuresilienceprojectaimstoprovideclimateriskinsuranceforupto400millionpeople1

livinginregionsvulnerabletoclimatechange(UNFCCC,2015).InsuResiliencewillusealternative

risktransferschemessuchasWeatherIndexinsurance,parametricinsuranceandcatastrophe

bondstomeasuretheestimatedlossandoftencalculatepayoutsbeforeanextremeclimatic

event (UNFCCC, 2015;UNFCCC,n.d.). Thus, the insurance industryhasbeen thrust onto the

globalpoliticalagendaasameansofmitigatingtheimpactsofextremeandfrequentweather

events(Surminski,2013;Artemis,2015;seealsoAsthana&Wintour,2017).Despitethis,Swiss

Re (2017) figures show that insurance density and penetration in developing countries,

particularlyKenya(seeFigure2),isstillrelativelylow.

1 This target is split into two approaches: 300 million people through sovereign-level disaster insurance (ARC and CCRIF) and 100 million through the private sector.

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2.3IndexInsurance

Before the introductionof index insurance, indemnity insurancemanaged the riskofnatural

catastrophes.However,indemnityinsuranceisdesignedtoprotecthouseholdsagainsttheloss

ofaspecificasset,ratherthanaspecificeventandpolicyholdersarepaidoutweeksafteraloss

(GlobalAgRisk,2012).Indexinsuranceseparatesindemnificationfromproduction,whichmight

resultinlowercostsandmoreapparentriskmanagementthantraditionalindemnityinsurance

(Coleetal,2012;GlobalAgRisk,2012;IRI-USAID,2013;Crichton,2008).Timelypayouts,lower

moral hazard, lower administration costs andmore transparency are among the benefits of

indexinsurance(Skeesetal,2006;Collieretal,2009;UNU-EHS,2017).Payoutsaredependent

onaphysicaltriggersuchasrainfallorwind-speed,ratherthanindividuallosses.Thisremoves

Figure2. SwissReSigma (2017)graph showing insurancedensityandpenetration indevelopingcountries

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theelementofsubjectivity,asonceanindex istriggeredthepayout isadministeredexante,

irrespectiveofassetlossordamage.Thus,indexinsuranceprovidesasafetynet,makingiteasier

forhouseholdstocopewiththeimpactsofnaturalhazardswithoutthefinancialburdenofdebt

(Hellmeuthetal,2009;Whalley,2016).

Advancesinscientifictechnologyandtheavailabilityofsatelliteimageryformeasuringrainfall

variabilityandcrop-yields for instance,havereducedthepreviouslyhightransactioncostsof

indexinsuranceandthusexpandeditsreachtomanypeoplewhowerepreviouslyconsidered

uninsurable(Greatrexetal,2015;DevelopmentInitiatives,2017).TIAinKenya,forexample,use

satellite imagery to track levels of foliage for livestock in semi-arid and arid drought-prone

regionsofWajirCounty.Oncetheconditionssurpasstheindextrigger,pastoralistsandfarmers

areimmediatelycompensated,whichhelpsbuildconfidenceandtrustbetweentheinsurerand

policyholder(Macmillan,2014).Consequently,therehasbeenevidenceofsmallholderfarmers

acrossdevelopingcountriestakingmoreclimate-smartriskswiththeiragriculturalmethodssuch

as crop diversification and production, which is a great example of the promotive nature

attachedtoindexinsurance(seeFigure3;Whalley,2016;Barrettetal,2007;Warneretal,2009;

Lashley&Warner,2015;UNFCCC,n.d.;Carter&Janzen,2012).

There has been an increase in index insurance projects across the developing world for

protectingrurallivelihoods(Johnson,2013;Peterson,2012;Meze-Hausken,etal,2009;seealso.

Figure 3. Whalley (2016: pp.12) illustrating the transformative and promotive function of Climate Risk Insurance

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GIIF,n.d.),withmacro-levelprojectssuchasACREAfrica(KilimoSalama)inKenya,Tanzaniaand

RwandaandARCprovidingcoverageacrosssub-SaharanAfrica(Greatrexetal,2009;Whalley,

2016).However,thereislimitedliteratureorcasestudiestoapplyitsuseforprotectingurban

livelihoods. With the growing success of index insurance projects for smallholder farmers,

parallelsshouldbedrawnfor low-middle incomeurbanlivelihoodsinNairobi(UNISDR,2015;

Whalley, 2016). Oxfam recently launched a Meso-Level Flood Index Insurance project in

Bangladesh to protect river-basin people in the flood-prone region of Sirajganj. Payouts are

triggeredbasedonwaterdepthanddurationoffloodingandimplementedthroughalocalNGO,

who distributes the funds to the households falling within the affected areas (Desai, 2013;

Oxfam,2013).Twoyearsafteritsinceptionin2012,700ofthe1661insuredhouseholdswere

paidout,allowingthemtorebuildtheirliveswithouttheburdenofdebt(SwissRe,2014).Nairobi

hasfourmainrivers(Ngong,Nairobi,MathareandMgathi)posinghealthandsafetyhazardsfor

nearbyhouseholds(Weru,2012),whichmakesOxfam’sframeworkforsuccessinBangladeshan

importantrhetorictotakeforwardforpotentialprojects inNairobi.Whilstagriculturalassets

areeasiertomeasurethroughapredeterminedindex,lossoflivelihoodthroughurbanfluvial

andpluvialfloodriskprovidesamoredifficultchallenge.

2.4ChallengesandLimitations

Index insurance is not appropriate for slow onset events such as SLR, nor is it an all-

encompassing solution for ending poverty (Whalley, 2016; Skees, 2008; Skees et al, 2006).

However, it is a vital tool in providingex anteprotection fromnatural hazards,whichhelps

reducevulnerabilitytodisasters.BasisRisklimitstheeffectivenessofindexinsurance,asthere

isoftenadisconnectbetweenthedataavailableandthelossesexperienced,whichdamages

trust networks between the insurer and policyholder (Bauchet, 2013). In addition, Johnson

(2013:pp.2667)claimstheindividualmustaccept‘somedegreeofbasisrisk’forindexinsurance

tobestructurallydependent,whichshifts theburden from institutions to individuals (Skees,

2008).Whileclimatechangeisaproductofdevelopedcountries’consumptionpatterns(Hulme,

2009), individuals indevelopingcountriesarecontinuallyexpected tobear theownershipof

climateriskandthis isdeepeninginequalitiesandfurtheringclimateinjustice(Reeves,2016).

Moreover,almostallthecurrentestablishedprojectsfallundertheremitofMacro-Levelindex

insurance, where governments and institutions are in control of administering payouts and

implementingthedesignandtechnicaloutputoftheinsuranceproduct(Reeves,2016;Collieret

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al,2009).TransparencyandaccountabilityattheMacro-Levelcontinuestoposeproblemsfor

establishedprojectsacrossthedevelopingworld(Reeves,2016;Caietal,2009).

Whalley(2016)suggeststhatforindexinsurancetoworkforthemostvulnerablecommunities,

theinsuranceindustryneedstobecommittedtoatransitionfromaprofit-drivenagendatoa

needs-based agenda (see also. Jansen et al, 2011). Furthermore, insurance needs to work

alongsideadditionalservicessuchaseducatingcommunitiestoenhancedisasterpreparedness;

building flood defences; improving waste management; community policing; and water

sanitation (Baker, 2012;Muindiet al, 2016). Index insuranceneeds touse a combinationof

capacitybuildingandraisingawareness tobuild insurance-friendlypopulationsandminimize

riskforsubsequentnaturalhazards(Surminski,2013;Reeves,2016).Climatechangeisawicked

issue; the stakes are high and decisions are urgent,whichmeans insurers and international

developmentagencieshaveaddedpressuretomakeindexinsuranceworkforthepoorestand

mostvulnerableinsociety.Linnerooth-BayerandMechler(2008)putforwardtheideaoffour

models for theprovisionofmicroinsurance:FullServiceModel;ProviderModel;Community-

basedmodel;andPartner-agentmodel.Community-based,member-ownedinitiativesarewell

servedtoimplementIBMIandthispaperseekstofillagapintheliteraturefortheprovisionof

mutualmicroinsurancefor low-middle incomeurbanpopulations.However,there isno‘one-

size-fits-allsolution’.Instead,localizedriskassessmentsareneededtodeterminethelocalneeds

andconditionsthatenableeffectiveindexinsuranceschemes(UNU-EHS,2017).

2.5MutualMicroinsurance

Thecommunity-basedmodelfallsundertheumbrellaofmutualmicroinsurance.Theinsurance

industry,overall, comesunder criticism fornotbeing inclusiveandprioritisingprofitsovera

needs-basedagenda,whichcanbedetrimentalforinsurancecoverageindevelopingcountries

(Whalley, 2016).Mutual microinsurance, however, is a bottom-up approach indicative of a

valuesandneeds-drivenagenda,whichcandeliveravaluableplatformforalleviatingpoverty

and enabling, educating and empowering local communities (ICMIF, 2015; Swiss Re, 2016).

Policy development in Kenya, on the other hand, is a top-down approach, where disaster

managementtendstobereactiveandad-hocratherthanembeddedwithindevelopmentefforts

(Pellingetal,2008).Inmutualmicroinsurancetheagentandthepolicyholderarestakeholders,

meaningthatdevelopmentcanbecontrolledbythecommunity,ratherthanimplementedby

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institutionsofgovernance(Reinhard,2006).Thishelpsaddressclimateinjusticeandcaninitiate

theprocessofadaptationtotransformation(Pelling,2010)neededtobuildresilienceinthemost

vulnerablecommunities.Reeves(2016)suggeststhatlocalmember-ownedgroups,backstopped

byequitably financedglobal socialprotection, canprovide thenecessaryplatform todeliver

mutualmicroinsurance. However, considering community-based initiatives as a ‘panacea’ to

DRMandCCAproblems isnot suitable (Allen,2006:pp.82), as theyneed to cooperatewith

systemsofgovernancetooperateeffectively(Wisneretal,2004;Cannon,2015).

Recently highlighted on the B20 agenda (ICMIF, 2016),mutualmicroinsurance is expanding

access to financialopportunities formarginalised communities and contributing towards the

SDGs (Swiss Re, 2016). ILO (2009) states that “63% of Kenyans derive their livelihoods

directly/indirectly fromcooperativebasedactivities”,which suggests theyarewellplaced to

enhance social cohesion and thus better protect collective assets (Kuria, 2011).Women are

amongst the most marginalised across the developing world (Demetriades & Esplen, 2008;

Wisneretal,2004;Doig&Ware,2016)andimprovingtheiraccesstofinancialopportunitiesis

embeddedwithin the ideology ofmutualmicroinsurance (ICMIF, 2016). For instance, Uplift

MutualsinIndiawasoriginallyformedbywomenself-helpgroupsandnowcoversover200,000

lives through a community-based model, where people come together to share, own and

manage risks (Uplift, n.d.; see also CARD MBA, n.d; Development Initiatives, 2017). Key

PerformanceIndicators(KPIs)forICMIF’s5-5-52strategyplaceanemphasisontheproportion

ofwomeninsured(ICMIF,n.d.).Additionally,greaterinsuranceliteracyneedstocooperatewith

developmenteffortsineducationacrossdevelopingcountriesandthisisbeingaddressedinboth

the5-5-5strategyandtheG7Insuresilienceproject(Surminski,2013;MCII,2015).Despitethe

apparent success of established health and life mutual microinsurance schemes for urban

populationsinIndia,KenyaandthePhilippines(Matuletal,2011),thereislimitedevidencefor

theuseof indextriggers intheeventofnaturalhazards.Thereafter, Iaimtofillagap inthe

literaturefortheprovisionofmutualindexinsuranceindevelopingcountries.

2.6SocialCapitalandTrust

2 ICMIF’s 5-5-5 Strategy aims to develop mutual microinsurance in five countries, reaching out to 5 million uninsured low-income households, (equating to 25 million individuals in total) through a three-phased approach: diagnostic research phase, an evidence-based strategy phase and a country intervention programme, which sees the strategy put into place.

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Riskisaccumulatedandperceiveddifferentlyacrossdifferentsocialandculturalgroups(Bull-

Kamangaetal,2003;Cannon,2015;Moser&Satterthwaite2010;Moser&Felton2007),which

ischallengingforhighlightingtherelevanceofinsuranceforDRM.Understandingthecapacities

andvulnerabilitiesembeddedwithincommunitiesiscentraltobuildingfloodresilience(ZFRP,

2017).Socialcapitalandtrustarefundamentaltothesuccessofthecommunity-basedmodel

(Blackburn, 2014; Cannon, 2008; Mladovsky & Mossialos, 2008). Both contribute to the

accessibility,availabilityandinclusivenessofinsuranceatthelocal-level.Drawingfromrelevant

academicliterature,thisresearchconsiderstheroleofsocialcapitalandtrustasananalytical

frameworkforstudyingtheinteractionsbetweenthecommunityandinstitutionsformanaging

flood risk. To answer theoretical questions using empirical qualitative data, theorymust be

drawnupontoinformdatacollectionandanalysis.Socialcapitalreferstothenetworks,norms,

values and trustunderpinninghumanandphysical capital in communities. Social capital has

beenusedtoincreasecollectiveproductivitybyimprovingtrustworthinessandsocialrelations

acrossthecommunity(Putnam,1993).

Building on Woolcock’s (1998; 2001; and Narayan, 2006) social capital framework used in

MladovskyandMossialos(2008)conceptualframeworkforcommunity-basedhealthinsurance

inlow-incomecommunities,thispaperwillexplorethevalues,communitygoalsandlocalpower

relationsdeterminingthesuccessofCBII.Woolcock’s framework looksat twotypesofsocial

capital at the micro-level: (i) relations within communities such as information channels,

trustworthiness and social support; and (ii) relations across communities such as social

inequalitiesinclass,ethnicityandgender(Mladovsky&Mossialos,2008;Woolcock,1998,2001;

Woolcock&Narayan, 2006). Focussing on these two factorswill provide an insight into the

importance of social capital for local-level DRM and consequently provide a platform for

analyzingthefeasibilityofIBMI.WoolcockandNarayan(2006:pp.9,seeFigure4.)claimthat

socialcapitalishighinboththesefactorswheremicrofinanceprogramshavebeensuccessful.

Thisdiagramreinforcesthestrengthofcommunitytiesinimprovingmicroinsuranceandthus

providesarelevanttheoreticalframeworkforthestudyofcommunity-basedmicroinsurancefor

extremeweathereventsinNairobi.

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Figure4.showsWoolcock&Narayan’s(2006)‘DimensionsofSocialCapitalattheCommunityLevel’and

identifiesthelinkbetweenhighsocialcapitalandsuccessfulmicrofinance

Additionally,Wisneretal(2004)‘AccessModel’willprovideaplatformforanalyzingthesocial

factors restricting access to social protection from hazards and limiting urban resilience.

Satterthwaite(2011)advocatestheuseofcommunity-basedorganisationstodirectlychallenge

thepowerstructuresthatpredominantlydetermineaccesstokeyresources.Baker(2012:pp.53)

claimsthatcommunitiesaremoreresilientwheresocialnetworksarestronger,whichmeans

accessibilitytosocialnetworksdeterminesadaptivecapacitytodisasterriskfortheurbanpoor.

Accesstosocialcapital,thereafter,facilitatescooperationandparticipationtocommunity-based

initiatives (Putnam, 1993, 1995) and trust within the community is a byproduct of social

limitations(Boumaetal,2008).Whilesome(Basaza,2008;Troyetal,2008)labelorganizational

andinstitutionalfailuresaskeytothelowenrolmentofcommunity-basedDRM,trustremains

anunderlyingproblem(Whalley,2016;Carrinetal,2005;Caietal,2009;Boumaetal,2008;

Zhangetal,2006).Poor trust-buildingwith institutions leads toa relianceon informal trust-

buildingwithincommunitiesforrisksharing(Morsink&Guerts,2011).Trustliesattheheartof

theinsuranceprocess(Greatrexetal,2015)andorganisationsneedtorealisethistoeffectively

reachtheiraimsofexpandingcoveragetothemostvulnerablecommunities.

While basis risk and transparency hinder the process of index insurance and damage trust

(Whalley,2016;Skees,2008;Reeves,2016;Johnson,2013;Bauchet,2013;Coleetal,2012),they

are also institutional problems and can be addressed by holding insurance companies to

account. Trust between individuals and social groups in the community is embeddedwithin

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social inequalities and directly hinders the impact of CBII (Cai et al, 2009, Kassahun, 2015).

Increasedcooperationandinclusivenessgohandinhand,butwherethereisalackoftrustwithin

thecommunitythereisalsoalackofcooperation(Boumaetal,2008).Iftheintersectionalityof

DRRanddevelopmentistobeembellished,socialdimensionsofcooperationandmutualityneed

to be explored in greater detail (Cannon & Müller-Mahn, 2010; Schipper & Pelling, 2011).

Discovering the key characteristics currently diminishing social capital across urban slums in

NairobiwillbenecessaryforanalyzingthefeasibilityofanIBMIproject.

Muindiet al (2016) considers the role of crime and conflict in contributing to poor DRM in

Nairobi.Manyhouseholdsdonotfeelsafeleavingtheirhomesinfearofhavingtheirpossessions

stolen and this heightens their exposure and vulnerability to natural hazards. Insurance

companiesincludingCICofferadditionalservicessuchascommunitypolicing,whichissetup

andrunforthebenefitofthecommunitytopreventpettycrimeandhelpminimizerisk(CIC,

n.d.).Thisdenotesthatwhileinsurancecanprovideanimportantfinancialsafetynetforpeople

tofallbackon, it issimplyatool inthebroaderarsenalofDRMand integratingthesemulti-

faceted components collaboratively is essential. Additionally, everyday life issues embedded

within urban livelihoods might prove more threatening than natural hazard risk (Pelling &

Wisner,2012),whichmakesownershipofinsurancemoredifficulttoencourage.

Powerrelationswithincommunitiesoftendeterminewhomakesdecisionsandthiscanhave

severerepercussionsforthosewithlimitedaccesstosocialcapital(Blackburn,2014;Cannon,

2008).With gender at the heart of inequalities in power, equitable representationmust be

realizedtocreateanenablingenvironmentforcommunity-basedinitiatives(Wilkinson&Pickett,

2009).Culturalandsocialfactorshereareintrinsicallylinkedandmustbeconsideredcollectively

tobetterincludeallmembersofthecommunityinthedecision-makingprocess(VanAalstetal,

2008; Cannon, 2008; Doig & Ware, 2016). To effectively undermine ineffectual courses of

governanceanddecentralizepowerbacktothecommunity,localparticipationmustunderstand

the potential for capacity building for integrating all members of society (Blackburn, 2014;

Mansuri&Rao,2012).Capacitybuildingisfundamentalforengagingpeopleandcreatingthe

demand for insurance,which is oneof the key challenges for scalingup insurance coverage

(Greatrexetal,2015;Miranda&Farrin,2012).Delegatingpowerandgovernancebacktothe

communitywillbecentraltothesuccessofindexinsuranceinitiatives(Miranda&Farrin,2012).

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3.Methodology

3.1Overview

Nairobi was identified for this study because rapid urbanization and the impacts of climate

changearecollectivelyamplifyingvulnerabilityforcommunitiesacrossurbanslums(KDI,2015).

TheUrbanARKproject isaresearchandcapacitybuildingprogrammeledbyProfessorMark

PellingatKing’sCollegeLondon.Theproject’smainobjectiveis“toreducedisasterriskinurban

sub-SaharanAfricabybreakingcyclesofriskaccumulation”(UrbanARK,n.d.).Myresearchwill

look to add to the research and policy publications for riskmanagement in the Urban ARK

project. Secondary data and 29 semi-structured interviews, with a combination of key

informants and participants, will make up my research methods. With the diversity of

participantsformyprimaryresearch,Ifeelthatanexploratoryframeworkforanalysiscanbe

derivedandbrokendowntoestablishtheroleofIBMIinNairobi.

3.2Semi-StructuredInterviews

For my primary research, I conducted 29 semi-structured interviews aimed at gauging

perceptions on the provision of IBMI and the challenges it may face in implementation.

Qualitative interviews offer a flexible alternative to the structured and rigid nature of

quantitativeinterviews.Althoughasemi-structuredformatmaynotoffermorereliabilityand

validitythanastructuredinterview,theinterviewsarelookingtogainagreaterunderstanding

oftherespondent’spointofview(Bryman,2001).Withamorerelaxedinterviewprocessthe

participanttendstobecomemorecomfortable,whichallowsformoreelaborateresponsesand

helpstheresearcherbetterinterpretthethoughtsandfeelingsoftherespondent.Perceptions

of the interviewee are shaped by their values, beliefs, behavior, relationships, places and

emotions,amongstothervariables.Thisissymbolicofsocialresearchmethodsoverallandthe

interpretivenatureofthesesemi-structuredinterviewswillplayalargeroleinmyfindingsand

conclusions(Longhurst,2003).Allinterviewswererecordedandtranscribed,wheretheyhave

beenusedappropriately toreinforcetheaimsofmyresearch. I spent justunderamonth in

Nairobiandconducted29(17participantsand12keyinformants)interviewsintotal.Thisisn’t

ahugeamountwithinthefieldofsocialresearch(Baker&Edward,2012),butunderthetime

andfundingconstraintsforamaster’sdissertationitwasbothrealisticandsufficient.

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3.3Positionality

Itiscriticaltoremainobjectivethroughouttheprocessofqualitativeresearch.Theparticipant’s

perceptionscanoftenbeinfluencedbytheepistemologicalstandpointoftheresearcher(Cloke

et al, 2004). Therefore, striking a balance between respondent detail and interviewer

questioningiscriticalinreducingpositionalbiasandincreasingthecredibilityoftheinterview

process. My professional background in mutual and cooperative insurance has shaped my

positiononthetopicandshouldbeacknowledgedhereafter.Baxter&Eyles(1997),however,

claimthatthepositionalityoftheresearcherisastrengthofqualitativeresearch,asitallowsfor

reflexivity.

3.4SamplingMethod

Formysamplingmethod,Iusedathree-partprocess:

(i) Geographical

AlongsideCICGroup,Iidentifiedareasthathavepreviouslybeenaffectedbyfloods.Threeof

theseareas,contributingtothirteenparticipants,wereintheSouthernandEasternpartsofthe

city:SouthC,IradiamaandKitengelo.IalsointerviewedfourmembersoftheNakomattUkay

ShoppingCentrecommunityintheNorthernpartofthecity.Thisareawassignificantlyaffected

byfloodinginApril2016(seeFigure5),becauseitisbuiltincloseproximitytoalargeriver.

Figure 5. showing vulnerability of Eastern lowlands in Nairobi for flooding (Taylor, 2016)

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(ii) Demographic

Forthenecessityofnarrowingdowntheprospectiveparticipants,Iidentifiedlow-middleincome

populationsinurbansettlementsasthemostappropriatesample.Thisgavemeamoreaccurate

samplingmethod for selecting interviewparticipantsandcreatedamoreclearandcoherent

research objective. By looking at low-middle income, this minimizes risk and decreases the

numberofpopulationneedingaidafteradisaster.Low-middleincomepeopletendtoliveon

the precipice of extreme poverty and their livelihoods are greatly exposed by climate risk.

Therefore,smallbusinessownersandemployeeswereinterviewedtogainaninsightintotheir

perceptionsoffloodriskandtheirtraditionalcopingstrategiesintheeventofnaturalhazards.

(iii) Accessibility

Whilstaplethoraofcommunity-basedorganisationscouldbeconsideredtohelpconductmy

interviews, CIC Group were immediately interested by the potential use of urban index

insurance.Inadditiontotheirworkwithruralindexinsuranceforsmallholderfarmers,theyalso

provide community-based health and life insurance acrossNairobi. Further to this, they are

involvedincommunityengagementprojectstoeducate,empowerandenablecommunitiesto

improveDRManddevelopment.Bymobilizingexistingcommunitynetworks fromCICGroup

engagementstrategies,Icouldspeaktosmallbusinessownersandworkerstobetterunderstand

theirneedsandconcernsaroundfloodrisk.

Theintervieweesweresplitintotwosamplinggroups:Participantsandkeyinformants:

(a) Participants

Participantsmakeup thebulkof the interviewsandpredominantlyconsistof smallbusiness

ownersandworkersfromfourflood-pronecommunitiesinNairobi.Thequestionsusedaimed

to interpretprioritizationsofriskandbarrierstoaccessingfinancialrisktransfermechanisms

such as affordability, accessibility and social mobility. Moreover, interpretations of how

residentsofeachcommunity interactwithenvironmentalriskssuchasfloodinganddrought.

Thequestionsalsoexploredhowsocialcapital inslumareas influencesthe fosteringof trust

betweengroupsofpeopleandinstitutions.Participationishighwheresocialcapitalandtrustis

high(Mladovsky&Mossialos,2008;Woolcock,1998,2001;Woolcock&Narayan,2006;Baker,

2012;Kassahun,2015),which increases theeffectivenessand longevityof community-based

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insurance.Theanalytical frameworkaroundwhichsocialcapitalandtrustwillbeexplored is

derivedfromtheoutcomeoftheseinterviews.

(b) Keyinformants

KeyinformantsweremadeupofthepotentialstakeholdersofanIBMIschemesuchasinsurers

(CIC Group), microinsurance consultancies (AB Consultants) and NGOs (SDI, KDI andWorld

Vision). Iapplieda‘snowball’samplingmethodusinginterpersonalrelationsandconnections

fromUrbanARK, ICMIF,andCICGroup tobuildabroaderanddiverse sampleof informants

(Browne,2005).Thequestionsusedforkey informantscenteredaroundthepotential foran

IBMIproductinUrbanNairobi.Byusingtheinformant’sexpertiseinindividualareas,Icouldgain

aninsightintothechallengesandlimitationsforindexinsurance.

3.5SecondaryData

Toanswertheoreticalquestionsusingempiricalqualitativedata, Imustusetheoryto inform

datacollectionandanalysis(Milesetal,2014).Therefore,secondarydataisanecessarytoolto

buildaconceptualframeworkforanalysis.Theconceptofindex-basedorparametricinsurance

isarelativelynewalternativerisktransfermechanism.Therefore,muchofthedatausedwillbe

intrinsicallygreydataratherthanpeer-reviewed.Onekeyaimforthisdissertationistobuilda

comparative conceptual framework around which the provision of mutual index-based

insuranceschemesindevelopingcountrieswillbeexploredinrelationtoalternativerisktransfer

strategies.Toconstructthisframework,amultitudeofgreydatawillbeanalysedfromreadily

availablejournals,webpagesandpublicationsfromorganisationssuchasSwissRe,MunichRe,

ICMIF,MicroinsuranceNetwork,WorldBank,Oxfamandothernon-peer-reviewed journals. I

willreinterpretandcombinesecondarydataandbreakdownconceptstocriticallyanalyseeach

processinvolvedintheprovisionofindexinsurance.Therefore,aconceptualframeworkwillbe

evident throughout my hypothesis. There is no directly relevant framework to present the

resultsofthisthesis,soIwillcombinethequalitativedatacollectedthroughmysemi-structured

interviewswith themultitude of secondary data obtained during the research phase of this

paper.Here,IcanformananalyticalframeworkaroundwhichIwillbeabletoformmythesis.

Radermacher&Roth’s(2014)theorywasappliedasatemplatetomeasureabsoluteandtotal

impactofmicroinsuranceschemes.Measuringtheimpactofonemicroinsuranceschemeina

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developing countrydoesnotnecessarily represent the absolute impactofmicroinsurance in

developingcountries.However, itcangiveabroader indicationofhowitcanbeusedasrisk

protection for thepoor (Radermacher&Roth, 2014). Therefore, Iwill be able to assess the

relevantimpactthroughcomparativeinformationsuchasestablishedcasestudies.Here,Iwill

use the success of established case studies such as Oxfam’sMeso-Level Flood Insurance in

BangladeshandUpliftMutual’scommunity-basedhealthinsuranceinIndiatobuildananalysis

forcomparison.Skeesetal(2006)feasibilitystudywasalsoappliedtomeasurethemulti-layered

natureofindexinsuranceschemesanddeterminewhatcharacteristicsareneededbeforeapilot

project is launched. Most feasibility studies employ the static von-Neumann-Morgenstern

expectedutility framework (Gollier,2003),butexploring thedemand for index insurance for

urbanlivelihoodsisverydifferenttotheneedsofrurallivelihoods(Miranda&Farrin,2012)and

“a thorough feasibility study should determine if index insurance would be appropriate,

beneficial and economical” (Skees et al, 2006: pp.39). Thereafter, I will fill the gap in the

literaturebetweenthenecessityforsocialprotectionfromfloodriskandthebenefitsofIBMI

forurbanlivelihoods.

3.6Challenges

Aswithmost studies, therewere challenges that emergedwhilst conducting field research.

However,itisimportanttonotethattheseobstaclesdidnotcompromisetheoverallaimsofthe

project. First, when approaching people informally for interviews, women were much less

inclinedtoparticipatethanmen,whichsymbolizestheculturalissuesembeddedwithinKenyan

society(WorldBank,2010;DevelopmentInitiatives,2017).Inaddition,smallbusinessowners

andemployeeswerenotwillingtogivetoomuchtimetotalk,whichmeantthattheinterviews

wereslightlyshorterthanthedesired30minutesIwasaimingfor.Second,morethanhalfofthe

interviewswereconductedinSwahiliandthereforeatranslatorwasneeded.Thetranslatorwas

notalwaysabletotranslateeverythingword-for-word,aswebothallowedtherespondenttime

toelaborateandexpresstheirviews.Thismeantthatwhentranscribingtheinterviews,Iwas

only able to provide a summary of answers rather than direct word-for-word translations.

Therefore,thelanguagebarrierandtheparticipants’willingnesstoelaborateindepthmadeit

morechallengingtogaugeperceptionsandunderstandingaroundtheirexperiencesofflooding.

Finally, communicating micro-level insurance was very difficult due to preconceptions

surroundinginsurance.Currentlythereareveryfewlow-premiummicroinsuranceproductsin

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Kenya,asthereislittleapplicationfrominsurersinthisarea.Subsequently,perceptionsofrisk

and trust played a larger role when analysing the primary data than perceptions of

microinsurance.

4.ResultsandDiscussion

4.1Introduction

ThepurposeofthisstudywastoexplorethedemandforandfeasibilityofIBMIinNairobifor

floodrisk,whilstalsoconsideringthepotentiallimitationsfromacommunityperspective.The

firstthreechaptersofthisdissertationconsideredthestatementoftheproblemwithareview

ofthe literatureandanoverviewofthemethodologicaldesign.Thischapterwillpresentthe

findings fromthequalitativedatacollectedandprovideananalysisanddiscussionusing the

analyticalframeworkconstructedforthisstudy.Afterinterviewingatotalof17smallbusiness

ownersandworkersacrossfourdifferentflood-proneregionsinNairobi,itbecameextremely

clearthatmanyurbanlivelihoodsareaffectedbyfloods.Furthermore,thereappearstobean

increasingurgencytobetterprotect individualsandcommunities fromtheperilsof flooding.

Similarly,the12keyinformantsinterviewedrecognisedtheroleofIBMIforaddressingthese

challenges.Barrierstoaccessinginsurancehowever,includedtrust,awareness,affordabilityand

accessibility.Thereafter,thefindingsformyresearchhavebeensplitintothreethemes:Trust,

CapacityBuildingandTechnicalInput.

First,Kenyancultureisinherentlycommunal,whichmeansindividualsshareallaspectsofrisk

collectively through informal community savings. Informal socialnetworksof trustappear to

undermine formal institutional trust-building and this poses a great challenge for insurance

penetrationinKenya.However,mutualmicroinsuranceinitspurestformcantraceitsorigins

backtotheseveryinformalsocialgroups,suggestingthatanenablingenvironmentformutuality

canbeevidentinNairobi.

Second, embedded within the framework of trust, most respondents showed a lack of

knowledgeorawarenessofanyinsuranceorDRMmechanismstoprotectthemselvesbeforean

extremeweatherevent.The impactoffloodinghasasevereknock-oneffectformanyurban

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livelihoods and most communities’ capacity to cope with this is limited. Thus, disaster

preparednessispoor,particularlyacrossinformalsettlements,whereeverydaylifeissuessuch

ashealth,costoflivingandaccesstoeducationaremorepressingthannaturalhazardsmeaning

thatactionsareonlytakenpost-hocratherthanexante.Thechallengeforscalingupinsurance

coverageiscentredaroundcapacitybuilding,withmostrespondentsinterestedinthebenefits

ofinsurancebutlackingtheappropriateassistance,guidanceandinformationneededtoacton

interest.Thisresearchfoundthatstakeholderswillneedtoworktogethertodevelopcapacity,

buildtrustandeducatecommunitiestominimiseriskandimproveDRManddevelopment.

Third,poordrainageandunsafehousingwerehighlightedasthemaincomponentsoffloodrisk

inNairobi, suggesting thatmore needs to be done from a city-level perspective to improve

infrastructureandincreasefloodresilience.Thesefactorsmustbeaddressedfirstbeforeindex

insurance for flood risk can be explored further. Additionally, through insight from key

informants,thisresearchgainedanunderstandingofthetechnicalinputrequiredforpotential

stakeholderstoconsiderparticipatinginpilotschemessuchasfinancialassistance,technology,

expertiseandevidence-basedresearch.Furthermore,highlightingthepotentialforinnovative

technology to transform the distribution and design of microinsurance will be central to

mitigatingissuesoftrustandenablingeconomicempowerment.

4.2Trust

4.2.1CommunalCultureandPractices

Kenyan’sarefundamentallycommunalinnature.Thiscanpredominantlybeattributedtotheir

emphasis around cultureand religion,whichunderpins theirbeliefs andattitudes towardsa

cooperativeandcommunal society. Inboth theirworking livesandathome,people tend to

share risks collectively rather than individually and have been applying these communal

practicesformanyyears(Kuria,2011;KAIG,2016;WorldBank,2010).Additionally,thereisan

emphasisonfamilysupportinKenya,whichmeansfamiliesareveryclose-knit.Itiscommonfor

eldersiblingstopayforeducationandhealthbillsfortheyoungestsiblingsinthefamily,whilst

alsocaringforhis/herindividualfamily.Thus,sharingwealthtoimprovethelifeoflovedones

doesnotbecomeaburden,it ismoreofaprivilegeandthisstewardshipextendstopeople’s

socialnetworkshereafter.

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Whilstmosturbanpopulations,particularlyacrossthedevelopedworld,tendtocomeunder

scrutinyforfavouringindividualisticlifestylesandattitudes(Hamamura,2012),thisstudyfound

that low-income populations in Nairobiwere innately social and shared the burdens of risk

betweenthemselves.76%oftherespondentstookpartinsomeformofinformalrisksharing

acrosstheirsocialnetwork.Socialcapital,henceforth,playsanimportantrolewithinvulnerable

communitiesinNairobi,whichsupportstheinitialempiricalevidencestatedinpreviouschapters

ofthispaper.Researchsuggeststhatcommunitiesaremoreresilientwheresocialnetworksare

stronger(Baker,2012)andthisstudyreinforcesthatnotion.Individualswithstrongsocialties

whosharedriskcollectivelytendedtodisplaybetteradaptivecapacitytodisastersthanthose

whomanagedrisksindividually.

Membershipofsocialgroups,commonlyknownas‘Chama’s’(Kiswahilifor‘group’)inKenya,for

savingsleadstoacommunalownershipofrisk,wherememberspoolrisktobetterpreparefor

andtacklethechallengesthatlifethrowsatthem.TheseChama’sareinformalcooperativesset

upbetweenlargefamiliesandgroupsoffriendsorbypeoplewithsimilarinterestsorlivelihoods.

CorrespondingwithWoolcockandNarayan’s(2006)socialcapitalframework,communityties

arehighwherepeoplearemembersofmicro-savingsprograms.Chama’sareagreatplatform

for informal trust-building, particularly amongstwomen, and currently have over 12million

membersinKenya(33%ofthepopulation).Thisexemplifiesthetrustworthinesspeoplehave

acrosstheirsocialnetworks(StartUpAcademy,2014).TheintroductionofMPESA(mobilemoney

transferandbanking)inKenyahasfurtherincreasedtheavailabilityandinclusivityofChama’s,

whichissymptomaticofthetransformativetechnologythatwillbeexploredinmoredetaillater

in this chapter (see section 4.4.3). Although Chama’s are predominantly used for covering

accidents,poorhealthand lossof lifewithin thegroup, there is scope toenhance flood risk

management throughexisting informal risk sharingwithgreater capacitybuildingneeded to

helpachievethis(seesection4.3).

MostChama’scollectivelysavethroughMFIsandareusedforinvestmentpurposes,butsome

alsoadoptastrategycalled‘risk’,whichissimplywhereaproportionofthemoneypaidinisset

asidetohelpcopewithallfacetsofriskthemembersfacethroughouttheyear.Thisisaperfect

exampleofinformalinsurancewhereindividualscanperceiverisksdifferently,oftenleadingto

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participationinriskierventureswiththeirbusinessesknowingthattheyhaveprotectionfrom

financial risk. This change of mind-set in its purest form is transformative and facilitates

economic empowerment across vulnerable communities in Kenya. Symbioticwith the SDGs,

these community risk sharing and investment platforms are helping to bridge the gap from

povertytoprosperityneededtoimproveurbanlivelihoodsinNairobi.

4.2.2InformalandFormalTrust-Building

Insurancepenetrationandmicroinsurancecoverage inKenya isvery low,at2.9%and5.98%

respectively(SwissRe,2017).Apracticeperceivedbymanyassomethingexclusivelyconfined

tothewealthiestelite,itisunsurprisingthatinsurancecoverageisnotwidespreadthroughout

Kenya.Insurancecompanies,therefore,onlyrepresentasmallproportionofthepopulationand

people at the bottom of the socio-economic pyramid (BOP) are overlooked. Perceptions of

insurancecompaniesandinsuranceingeneralhascausedanincreaseintheuptakeofinformal

risktransfer.ThisstudyfoundthatdemandformicroinsuranceinKenyaisintrinsicallylinkedto

poorformaltrust-buildingwithinstitutions.Consequently,manylow-incomecommunitiesturn

to the informal market, where social capital and trust is stronger. 65% of the respondents

presented a lack of trust towards insurance companies and formal institutions alike. Issues

includingdishonesty, lackoftransparency,affordabilityandaccessibilitywerestressedaskey

factorsaffecting theprocessof formal trust-building.Claims settlingwasamongst themajor

reasons why mistrust was present in the process of insurance, highlighting the potential

transformativeroleofindexinsuranceforreversingthesenegativeperceptions.Trust,therefore,

is highlighted as the biggest challenge facing the scale-up of insurance coverage in the

developingworldandaddressingthisissueiscrucialtotheobjectivesoftheG7Insuresilience

initiativeandsimilarinternationalprojectsaimingtoreducetheprotectiongap.

“Unlikealoan,insuranceisapromiseforapaymentlaterforapremiumpaidnowandas

such,trustisinherentlyatthecoreoftheprocess”(Greatrexetal2015:p.24)

Trust isthepredominantfactorcausingtheexponentialriseof informalrisksharing,asmost

respondentshaddifficultiestrustinginstitutionssuchasbanksandinsurancecompanies.These

trustissuesarelargelycausedbypastexperiencesorpreconceptions,butalsoshapedbytheir

peerswithidentityandstatusplayingadominantroleinchangingbehavioursandattitudesin

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thecommunity.Trustwithinthecommunity(informaltrust)isconsequentlynotablystronger

thaninstitutionaltrust(formaltrust)andthiscanserveasanexplanationastowhyinsurance

take-upissolowinKenya.MorsinkandGeurts(2011)alsohighlightcomparablethemesintheir

work on microinsurance and trust-building, where demand for microinsurance is primarily

embedded within the framework of formal trust-building. Thus, mobilising the success of

informaltrust-buildingshouldbeanareaoffocusformicroinsuranceproviders(Bauchet,2013).

Ontheotherhand,itcouldbesaidthattheinformaleconomicmarketinKenyaisoutpacingthe

formalandproponentsofinformalitymightseektokeepthetwoseparated.However,thescope

for scaling up informal risk transfer is limited due to lack of resources, financial assets and

regulatory requirements.Many informal cooperatives transition over time into large formal

cooperatives,withsomekeyinformantspointingtosuccessesincentralKenyaforthesewide-

scaletransitions.

Recognisingthis,theformalinsurancemarketneedstopursuelinesofcooperationwithexisting

socialgroupstobetterunderstandtheirneedsandprovideproductsfocussedentirelyaround

thesegroups.Thecultureofcommunallivingmeanssocialnetworksareaperfectexampleof

howpeoplesharerisksfinanciallyandmobilisingthesegroupstoparticipateinformallinesof

risk protection is a key area to explore. CIC Group, for instance, are currently distributing

microinsurance through aggregators such as affinity groups and self-help groups. Creating

demandformicroinsuranceremainsachallengethoughandpartneringwithorganisationssuch

asNGOswhohavealreadybuilttrustinthecommunityshouldbeafocalpointthroughoutthe

consultationprocessofdesigningIBMI(seesection4.4.2).

4.2.3EnablingEnvironmentforMutualMicroinsurance

Mutualinsurancecantraceitsrootsbacktofriendlysocietiesandcooperativesinthelate17th

Century,whereriskpoolingformedbetweenworkersandlikemindedindividualsintheabsence

of mainstream insurance solutions (Swiss Re, 2016: p.2). Similarly, the current 21st Century

informal savings practices in Kenya borne out of impractical, inaccessible and unaffordable

insurancesolutions,provideanindicationofmutualityatitsroots.Failuresinthemainstream

market contribute to a rise in the uptake ofmutuality, with the recent economic recession

revealing thereflexivityofmutual insurance (SwissRe,2016).Gonzalez-Pelaez&vonDahlen

(2015) refer to three sectors in their review on insurance regulation for sustainable

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development:Public,PrivateandMutual.Separatingmutualinsurancefromtheprivatesector

is indicativeofthedetachmentmutualityinstilsatitscorethroughitsmember-ownedrather

than shareholder driven agenda. Reflecting this bottom-up approach to insurance, recent

attentionhasbeendrawntothemutualsectorforadvancingtheSDGsthroughmoreinclusive

insurancesolutions(ICMIF,2016).Withtrustrootedatthecoreofinsurance,thisstudyfound

that mutual microinsurance is well placed to meet the needs of the most vulnerable

communitiesacrossNairobi.

AsseeninIndiawiththecasestudyofUpliftMutuals(Section2.5),informalsavingsgroupsand

self-helpgroupsprovideanenablingenvironmentformutualmicroinsurancetooperate.

Theoriginsofmutualityarefirmlyembedded in informalcommunalpracticesandmobilising

theseexisting communitynetworksof trust areneeded to facilitate theprovisionofmutual

microinsurance.Drawingonempiricalevidencefromexistingdevelopingworldcasestudiesand

insights from respondents in Nairobi, this study unearthed clear comparisons between the

successofmutualmicroinsuranceandhighlevelsofsocialcapitalwithincommunitynetworks.

Inaddition,communities’willingnesstosaveandputasidehouseholdincometohelpeachother

isindicativeoftheircooperativenatureandformsthebasisformutualentities.However,access

tosocialnetworksmaydeterminetheinclusivityandaccessibilityofmicroinsurance,whichcould

haveadetrimentaleffecttoitsoveralleffectivenessandtotalimpact.

Mutual microinsurance can enable the transformation from a profit-driven to needs-based

agenda,whichisnecessarytobridgethegapbetweeninformalandformaltrust-building.Thus,

increasing protection from the accelerating rate of natural hazards in the developingworld.

Tailoring community-based products to address the impacts of flooding will provide both

protection from climate-related risks and facilitate economic empowerment through

community cohesion. Subsequently, thiswill noticeably contribute to achieving the goals of

sustainable development, DRR and CCA, whilst also providing another indicator of the

fundamental interconnectivity between the three fields. Improving financial inclusion and

closing theprotectiongapare targets transcendingall threemajor internationalagreements

from2015.IBMI,throughthelensofamutualmodel,canbecomeacentraltoolinattempting

toachievethesecollectivegoals.

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4.3CapacityBuilding

4.3.1CommunityPerceptionandAwareness

Risksforurbanlivelihoodsareomnipresent inNairobi.Challengesdirectlyrelatedtoflooding

suchaswatercontamination,diseaseandlossof incomeareareminderofthemulti-faceted

nature of flood risk and the broad spectrum of issues that need to be addressed to better

enhance flood risk management. Coping with the impact of natural hazards is particularly

challengingforsmallbusinessownersandworkersacrossNairobi.Thisstudyfoundthatdrastic

livelihoodcutswereapparentinthefaceofthesechallenges,withknockoneffectssuchasfood

rationing, withdrawal from education and poor access to healthcare placing families under

severefinancialandpsychologicalstress.Culturalandsocialdynamicsincommunitiessuchas

religion,genderandpeerpressureshapethewayindividualsperceiveandtransferriskacross

thecommunity.Concurrently,behavioursandattitudesdetermine theadaptivecapacityand

preparedness of communities to cope with the catastrophic impacts of flooding. Although

insurance is not a panacea for DRM or reducing poverty, it is a transformative tool if used

effectivelyanditsbenefitsshouldbecommunicatedtoimproveDRMforfloodrisk(Abu-Bakar

etal,2017).

Onecommonthemeacrossallkeyinformantsandrespondentswasthelackofawarenessor

knowledgeofinsuranceforprotectingindividualsagainstnaturalhazards.Whenqueriedover

theirunderstandingofinsurance,88%oftherespondentsdisplayedbasicknowledgeonhealth

andmotorproductsbutnotnaturalhazards.Thisportraystheglaringeducationalchallenges

facing thepotential uptakeof IBMI inNairobi, butdoesnotdemonstrate a lackof demand.

Proponentsofindexinsurance(Whalley,2016;Hellmeuthetal,2009;Barrettetal,2007;Warner

etal,2009;Lashley&Warner,2015;UNFCCC,n.d.)indicateitstransformativenatureforrural

livelihoods and this study discovered its equivalent potential for urban livelihoods. Similar

indicationsofdemand for IBMIwereclearlyapparent fromunderstandingpeoples’concerns

aroundfloodrisk.Indexinsurancecanostensiblybetailoredtomeettheriskmanagementneeds

ofurbanlivelihoods.Therefore,moreexplorationintoitsapplicationshouldbeconsideredby

insurancecompaniesandDRMagenciesalike.

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Whilsttherearefewreadilyavailableproductstailoredtourbanlivelihoodsforprotectionfrom

climate-risk, there is also a lack of education across communities on risk perception and

preparednesstohelpminimizeclimate-risks.TheinsuranceindustryaswellasNGOs,regulators

and government institutions have a duty to place specific focus on education building for

vulnerable communities. Increasing understanding on insurance and future IBMI products

beforethedistributionprocesswillhelpdecreasebasisriskandremoveelementsofmistrust

from the claims process. Capacity for scaling upmicroinsurance coverage in the developing

worldisinherentlylimitedbyawareness.Creatingdemandandbuildingtrustrequiresgreater

focusoneducationbuilding.Thiscanbedonethroughinspiringyoung,passionate leadersto

address these challenges of awareness from within the community and eventually take

ownershipof IBMI in the long-term.Wheremanydevelopingworld index insuranceprojects

havefailedislongevity(Greatrexetal,2015;Abu-Bakaretal,2017).Toenableself-sustaining

IBMIandreducerelianceondonors,capacitydevelopmentmustbeentrenchedwithintheinitial

strategyanddesignprocessofpilotprojects.Thisrequirescooperationbetweenpublic,private

and mutual stakeholders to ensure an integrated and effective approach for designing,

deliveringandmaintainingIBMI.

4.3.2AffordabilityandAccessibility

Affordabilityofmicroinsurance isdirectly linkedtoawareness.Many insurancecompanies in

Kenya don’t explore the practice of microinsurance because the costs associated with

distributionandmarketingaretoohighandnotcost-effective.RepresentativesfromCICGroup

statedtheseinitialcostsasthebiggestchallengeforspreadingmicroinsurancecoverageacross

the country. Micro-products are informally referred to as CSR within large insurance

organisations,withtheirbenefitsnotcongruentwiththeirprofit-makingaims.Premiumsfrom

microinsurance generate small income and it often takes several years to strike a balance

betweenprofitandloss.Whilstanapproachdisparatefromthecurrentprofit-drivenagendais

consideredthroughoutthisstudy,it isdifficulttoseehowcompaniesindevelopingcountries

canprioritisethis.Sacrificingthecurrentapproachrequirestechnicalandfinancialassistance

from equitable international organisations who are passionate and driven by the desire to

activelytransformpeoples’livesthroughevidence-basedsolutions(Reeves,2016;Greatrexet

al, 2015). The challenge ofmicroinsurance is not simply confined to its high initial costs of

production,butinsteadthelackofvisionfrominsurancecompaniesanddevelopmentagencies

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toplaceaprimaryfocusoninnovatingmicro-productstomakethemmoreaccessibleandmore

affordable. Only through cross-organisational cooperation and in-depth qualitative and

quantitative field research can strategies begin to develop for providing themost effective

products.

Macro-level projects tend to overlook this capacity building phase in favour of maximising

coverageovertheshort-term(Reeves,2016;Collieretal,2009).Consequently,thebenefitsand

caveatsofpossessinginsurancearenotcommunicated,meaningthatcommunities’behaviours

andattitudestowardsriskcontinuetoheightentheirvulnerabilitytodisasters.Whilethismight

betherightapproachinsomedevelopingcountries,itdoesincreaserelianceonaidandmight

divertattentionawayfrommorerelevantDRMstrategies.Therefore,macro-levelprojectshave

their role to play, but they fail somewhat in their attempts to work alongside sustainable

developmentinfavourofprovidingquickfixestoproblemsthataredeeplyentrenchedwithin

the socio-economic and cultural dynamics of communities.Micro-level insight is required to

better understand these complexities and learning from existing community networks is a

pertinentapproachherein.

Ultimately, this study found that capacity and education building before the distribution of

microinsuranceisinherentlyassociatedwithsuccessofscalingupcoverageandprovidinglong-

termsolutionstodisasterrisk.Mostrespondentsfeltoutoftouchwithcurrentmicro-products

onthemarket,withmanyfavouringinformalsolutionstoriskratherthanformal.Affordability

remainsakeychallengeforinsurancecompanies,withABconsultantsandCICGroupinformants

labelling regulatory requirements as a major stumbling block to pricing affordable micro-

products.ABConsultants suggest that thereappears tobea glaringdisparitybetweenwhat

microinsuranceshouldbepricedatandwhattheactuariesarepricingitat.Consequently,many

respondents felt insurance was neither accessible nor practical for a large majority of the

population.Organisational perception of risk differs somewhat from cultural risk perception

across communities and there needs to be drastic changes in mind-set from the insurance

industrytofacilitatethiswideningperceptiongap.Microinsuranceisstillanemergingmarket

and needs to be viewed pragmatically henceforth. The commercialisation of risk from a

microinsurance perspective needs to radically transform to meet the needs of the most

vulnerablecommunities.Therefore,regulatorsmustplayamajorroleinprovidinganenabling

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environment fornew innovativetechnologies (Section4.4.3)andapproachestoenhancethe

distributionofmicroinsuranceandreducemarketingcosts.

4.3.3BuildinganInsurablePopulation

ToreachtheG7InsuResiliencetargetof400millionpeopleinsuredfromclimate-relatedrisksby

2020,itisbecomingrelativelyclearthatthereneedstobegreaterawarenessofindexinsurance

from a community-level perspective. The key challenge for scaling up insurance coverage is

exactlythis.Providingcoverageforthemassesinthefastestwaypossibleisrelativelyeasywith

advances in technological distribution systems (Section 4.4.3) and increasing donor interest.

However, providing sustainable coverage with the capability of empowering communities

economicallyandsociallyshouldbethelong-termaim.Thiscannotbedoneinamatterofweeks

or months. This must be a process which first and foremost considers the needs of the

community to enable the most appropriate product design, before propelling imprudent

insuranceschemesontoindividualswithlittleornoknowledgeofthedeepersocialandcultural

complexities embedded within societies. It is vital that we learn from existing community

resilienceeffortsandbuildonwhattheyarealreadydoingtobetterdesignanddistributeindex

insuranceindevelopingcountriesandensurethattheneedsofthepeopleaffectedaremet.

Keyresearchforfacilitating IBMIneedstobestudiedfurthersuchaswhy insurance isfailing

vulnerable communities, what characteristics need to be in place to make insurance work

(infrastructure,education,health)andshouldtherebeadditionalproductstoworkalongside

climaterisksuchashealthandlifeinsurance.Long-termprojectstodevelopinsurancefriendly

populationswillsignificantlyhelpreduceriskaccumulation.Additionally,communitiesshould

becentraltothegovernanceanddecision-makingprocesstobridgethegapofinstitutionaltrust

thatislimitingmicroinsurance.However,thecommunity-basedmodeloftenrequiresfinancial

assistance and this study calls for a vertically integrated approach from bottom-up

understanding to top-down finance, with a primary focus on community economic

empowerment. Technical understanding (Section 4.4.2) is vital and this can only be done

through cooperative platforms of knowledge,which form the basis of cooperation from lay

knowledgetotechnicalexpertise(Rudiak-Gould,2013;Munene,2015).

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ProjectslikeICMIF’sthree-partimpact-based5-5-5strategy(seeSection2.5)shouldbeexplored

across the microinsurance space to help empower communities and reduce the financial

dependency that sooften limits sustainabledevelopment (ICMIF,2015).Bybuildingcapacity

throughprogrammestodevelopandimprovemanagementskills,insuranceliteracyandDRM,

communities become the sales agent for insurance. This reduces the issues of cost-benefit

analysis for insurance companies and benefits communities through the development of

transformativeeconomicskillsandprovidingthemwiththemechanismbywhichpeoplecanset

up, run and own their own business for the benefit of the community. Thus, an insurable

population can be built with a view to minimizing disaster risk and enhancing disaster

preparedness.

4.4TechnicalInput

4.4.1Infrastructure

There isempirical andqualitativeevidence from this study to suggest thaturban livelihoods

wouldbenefitfromIBMIinflood-proneregionsacrossNairobi.Despitethisapparentdemand,

thereareafewcaveatstoconsiderbeforepursuingitsapplicationinapracticalsense.Floodrisk

can be minimized from a city-level perspective through improved SWM, effective drainage

systems,adherencetobuildingregulationsandsafehousing.Mostrespondentspointedtopoor

drainageastheunderlyingfactorincreasingtheriskofheavyrainfallflooding.Drainagesystems

becomeblockedduetosolidwaste,whichmeanssurfacewateraccumulatesandspreadsacross

roads. Local city council and government officials need to interact with the community to

improveSWMthroughbettereducationandinfrastructure.Failingthis,community-basedNGOs

suchasKDIcouldplayapivotalroleinmobilisingcommunitiestoreducesolidwasteandimprove

floodresilience.Therefore,anintegratedapproachtofacilitatetheprocessesofindexinsurance

is needed, with the city council and government providing the enabling environment for

communities to access resources and mitigate the impact of floods (Satterthwaite, 2011;

Munene,2015).However,evenwitheffectivedrainageandsafehousing,manykeyinformants

felttherewouldstillbesignificantfloodriskinthecomingyears,owingtotheclimateprojections

for higher intensity rainfall patterns (IPCC, 2012). Henceforth, a requirement for tailoring

financialrisktransferproductstoprotecturbanlivelihoodswillbevitalinreducingvulnerability

andincreasingresiliencetoflooding.

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4.4.2Stakeholders

CorrespondingwiththeOxfamschemeinBangladesh(Section2.3),therelevantstakeholders

neededtodesign,manageandsustainanIBMIprojectinNairobimustworkcooperativelyacross

various fields of expertise. A project lead (INGO), an insurance company (national/ regional

insurer), a local NGO (policyholder), a reinsurance company (international organization), a

funding agency (international development agency/ government), a technical partner (data

provider)andadesignpartner (consultancy)areamongst theplethoraofmulti-stakeholders

usedthroughouttheprocessoftheOxfamproject(Desai,2013;Oxfam,2013).Consideringthe

successoftheOxfamschemeforindexinsuranceandthemutualisationofriskinNairobi,there

isevidencetosuggestthatarelativelysimilartemplatecouldbeusedattheMicro-levelacross

the Kenyan capital city. Despite the clear distinctions between flood risk in Bangladesh and

Nairobi,successfulcasestudiescanpresentabroader indicationofhowIBMIcanbeusedas

climate-relatedriskprotectionforvulnerablecommunities(Radermacher&Roth,2014).

Local NGOs with readily accessible social networks act as a moral compass for insurance

companies by distributing fair payments to families and businesses affected by floods.

Additionally, they provide much-needed education to help develop efforts on increasing

communityfloodresilience.Consequently,thiswillalsohelptobuildthenecessarynetworksof

formalandinformaltrustforscalingupinsurancecoverageacrossNairobiintheyearstocome.

An important aspect to consider is that both microinsurance and index insurance are still

relatively new products. Data modelling organisations with access to innovative ways of

calculatingthefrequencyandseverityofriskscanprovideamuch-neededplatformforinsurance

companies to price risks accordingly and affordably. Alongside technical expertise, financial

assistance will also be pivotal for an IBMI scheme, with representatives from CIC Group

suggestingthat90%oftheinitialcostswillneedtobesupportedthroughdonors.Inrecentlight

oftheUKgovernment’sannouncementonfundingdisasterinsuranceinAfricatoreducereliance

ondisasteraid(AsthanaandWintour,2017),thereappearstobeaplethoraofrelevantdonor

interest across international development agencies to pursue IBMI projects in sub-Saharan

Africa.

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4.4.3TransformativeTechnology

Aspreviouslymentionedthroughoutthischapter,advancementsintechnologywillbecentral

tomaintaining the success of IBMI in developing countries. Case studies from TIA in Kenya

(Section 2.3) have proven the dexterity of satellite imaging for improving the speed and

effectivenessofclaimssettlingforsmallholderfarmers.Theindextriggeritselfistransformative

for the insurance industryandrepresentsa technologicalsolutionforbuildingtrustbetween

communitiesandinstitutions.Moreover,indexinsuranceembodiestheparadigmshiftthatwill

berequiredfromtheinsuranceindustrytokeeppacewiththerisksassociatedtoourconstantly

changingclimateandultimatelyincreaseprotectionfromclimate-relateddisastersformillions

of people in the developingworld. The quality of data available is a challenge that is being

addressedpresently. Limitedmeteorological data in sub-SaharanAfrica symbolises the ‘data

poverty’thatiscurrentlyholdingbacktheprogressofindexinsuranceindevelopingcountries

(Greatrexetal,2015;DevelopmentInitiatives,2017).Constantchangeandadaptationtobetter

increase the impact of index insurance will be a prerequisite from relevant stakeholders

responsible.

Balancing technological innovation with social research must be considered to make sure

policyholdershaveaclearunderstandingoftheircoverandtherisksassociatedwithdisasters.

Inaddition,combinedrainfallpredictionestimatesandconsultationwithindigenousnetworks

ofknowledgetounderstandandwriteriskwillbekeytooffsettingthechallengeofbasisrisk

(Bauchet,2013).Issuesofdishonesty,lackoftransparency,affordabilityandaccessibilityareall

characteristics that transformative technologies can help reverse. Lack of transparency, for

instance,isbeingtackledthroughBlockchain:atransparenttechnologicalpaymentsystemthat

hasthepotentialtocompletelytransformthemicroinsurancemarket(MicroinsuranceNetwork,

2016).M-PESA, amobilebankingand transfer system, represents aperfect exampleofhow

technologyhas beenused to transform thebanking and insurance industries in Kenya,with

insurers like CIC Group and projects like ACRE Africa currently pursuing the distribution of

microinsuranceandsmallclaimssettlingthroughM-PESA(Greatrexetal,2015).Insurersmust

recognisethenecessitytobepragmaticininsurancebytakingfinancialriskstotransformtheir

businesspracticesthroughdisruptivetechnologies(SwissRe,2016).

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5.Conclusion

Climatechangewillsignificantly increaseboththefrequencyandintensityofflooding inEast

Africaoverthecomingyears(Niangetal,2014;IPCC,2012).Recognisingthis,moreneedstobe

donetoenhancesocialandfinancialprotectionfromfloodrisk.Thisstudyfoundthatadaptive

capacity and resilience to flood risk is increased through informal risk sharing platforms.

CommunalcultureinNairobidenotestheimportanceofcollectivismforaddressingclimaterisks.

Additionally,socialcapitalplaysasignificantroletowardscreatingmoreinclusiveinformalrisk

financing.Highinformaltrustacrosspoorurbansettlementscanbe,inmostparts,attributedto

poortrustinformalinstitutions.MorsinkandGuerts(2011)considerformaltrust-buildingasthe

keychallengetoscalingupinsurancecoverageandthisstudyfoundsimilarresults.Theability

toscaleupinsurancecoveragetoreducetheprotectiongapisinnatelyembeddedwithinformal

trust-building.Developingworldindexinsuranceprojectsneedtoconsiderthiswhenpursuing

macro-levelapproaches.

While the informal market continues to flourish through the facilitation of Chama’s,

microinsurancepenetrationinKenyaremainslow.Insurersmustexploremoreopportunitiesto

pursuelinesofcooperationwiththeinformalmarkettobridgethegapbetweeninformaland

formaltrust.InformalrisksharinginNairobicreatesamantrabywhichmutualmicroinsurance

can thrive, with similar transitions from informal insurance to formal occurring across the

developingworld(ICMIF,2015;Uplift,n.d;Ana-Gonzalez&von-Dahlen,2015).Embeddedwithin

mutuality is the conceptof communityownershipandempowerment.Capacitybuildingand

educationlieattheheartofthisandstakeholdersneedtoconsidertheimportanceofreducing

futurerisksaswellassimplyreducingcurrentrisks.InsuranceisnotapanaceaforDRMorending

poverty and needs to be integrated into a broader objective, where it works alongside

sustainable development such as education, economic empowerment, gender equality and

sustainable communities.Here, IBMIhas theability to transcendDRR,CCAand theSDGsby

improving resilience to climate risk, increasing financial inclusion and enhancing disaster

preparedness.

There is existing empirical and qualitative evidence from this study to suggest that index

insurancecanbeusedtoenhanceDRMforfloodriskinNairobi.Barrierstoaccessinginsurance

however, included awareness, affordability and accessibility. Microinsurance and index

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insurancearerelativelynewproducts.Insurersandregulatoryauthoritiesalikehaveadutyto

bepragmaticandlaunchmicro-productsthatdisruptthemarketthroughnewtechnologies.To

achieve this for index insurance, the issueof datapovertymustbe addressed indeveloping

countries.Moreover,strikingabalancebetweensocialresearchandtechnological innovation

willbecentraltothesuccessofIBMI.Itisvitalthatwelearnfromexistingcommunityresilience

efforts and build on what they are currently doing to better design and distribute IBMI in

developingcountriesandensuretheneedsofthemostvulnerablepeoplearemet.Engagingthe

communitytodrivechangefromthebottom-upthroughyoung,passionateleadersisneededto

economicallyempowercommunitiesandenable the transition fromadaptation to long-term

transformation.Here, stakeholderswill need towork cooperatively acrossorganisations and

communitiestodesignanddistributethemosteffectiveproducts.Aparadigmshiftwillneedto

beapparentfromtheinsuranceindustrytofacilitatethesuccessofIBMIinNairobiandacross

thedevelopingworld.Therefore,IBMIshouldpursueaneeds-basedapproach,whereprojects

arebuiltforandrunbythecommunity.Individualsfromwithinthecommunitywhohavethe

visionandpassiontoplayapivotalroleinIBMIprojectsneedtoworkcooperativelyalongside

formalinstitutionstocreateaninclusiveandaffordableproduct.Thus,integratingplatformsof

knowledgefrombottom-upcommunityactiontotop-downtechnicalexpertisewillbeneeded

toenablethemostapplicableIBMIprojectforthecommunity.

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ThecontentsofthisWorkingPaperreflecttheviewsoftheauthoronlyandnotthoseoftheUKDepartmentforInternationalDevelopmentortheEconomicandSocialResearchCouncil.ThispaperispartoftheUrbanARKStudentWorkingPaperseriesandisbasedontheauthor’sMastersDissertation,completedintheGeographyDepartmentatKing’sCollegeLondon.