An innovative microinsurance venture incubator has been set up in Bermuda with the aim of helping to bring insurance and risk protection to billions of people in areas of the world underserved by the global insurance market.

The microinsurance venture incubator (MVI) holding company will have a three-person management team to design and launch an intended 10 microinsurance ventures in emerging economies during the next ten years. The markets being evaluated at the moment are Africa, Latin America and emerging areas of Asia.

The MVI project was announced yesterday at the World Economic Forum in Davos, Switzerland.

Swiss Re estimates the global microinsurance market has the potential to cover as many as four billion people, with a potential premium volume of $40 billion.

It is envisaged the microinsurance initiative will provide opportunities for individuals and small businesses who do not have access to mainstream insurance products and services.

“Innovative research and development enabled by the MVI will make affordable insurance products accessible to millions in the developing world, greatly reducing the cost of distribution on a global scale through reverse innovation could be one the most enduring legacies of this project,” said Brian Duperreault, chief executive officer of Hamilton Insurance Group.

The consortium of companies behind the initiative are Hamilton Insurance Group AIG, Aspen Insurance Holdings, Catlin Group, Guy Carpenter & Company, Marsh & McLennan Companies, Transatlantic Reinsurance Company, XL Global Services and Zurich Insurance Group.

Mike McGavick, CEO of XL Group, said: “In many regions of the world, opportunities to better oneself and one’s community come more slowly and with devastating risks because the resilience created by the insurance sector is not available.

“This must change, and I am terribly proud that this consortium have come together to do something about it.”

The founding companies will initially hold equal shares in the MVI which, along with launching microinsurance ventures, will manage relationships with the consortium members and outside parties. The MVI will not be a risk bearing entity, however the founding members may provide risk capital to support microinsurance ventures.

A briefing document from Guy Carpenter, explained: “The business model stems from a shared vision that the ability to manage and finance risk is important to the development of a society and, as an industry we have a responsibility to be socially relevant by responding to the risk needs of the underserved.”

It is believed a collaborative approach will deliver greater benefits than those achievable by a single company; with innovation costs shared and competitors pushing toward a shared goal, together with mutual learning and the engaging and developing of talent.

Announcing the MVI at the annual meeting of the World Economic Forum was also strategic. The founding members believe the Forum can help open doors for the MVI as it seeks partners for distribution, technology and also public/private partnerships.

Other consortiums with synergetic missions could produce strategic relationships. As an example, the MVI founders are interested in meeting with Internet.org, a global partnership between Facebook and six cell phone companies that aims to improve internet access to the two-thirds of the world not yet connected.

“Understanding their specific market strategy and focus would enable cooperation allowing for the MVI to benefit from their success and vice versa,” it was stated in the Guy Carpenter produced briefing document.

Establishing partnerships with distribution agents, such as non-governmental organisations, microfinance institutions, utility companies and retailers already engaged in delivering products or services to the poor, is also viewed as a way for the MVI to better design its products and “leverage already existing distribution channels”.

Michael Kerner, CEO general insurance at Zurich Insurance Group, said: “When successful, it will bring the benefits of modern risk management to millions of first-time insurance buyers.”

The CEO-elect of the MVI is Joan Lamm-Tennant, who is global chief economist and risk strategist with Guy Carpenter. She said: “By forging strategic alliances with entities that have direct and trusted relationships, we will understand the needs of the customer, and subsequently identify specific ventures and solutions accordingly.

“I am excited about this unique business model. It has been designed to allow for the long-term focus needed to balance profitability with social impact. Collaborative ownership enables the MVI to access the vast and specialised knowledge and resources of founding firms to the benefit of the underserved.”