.
Document of
The World Bank
.
FOR OFFICIAL USE ONLY
PROJECT CONCEPT NOTE
ON A
.
PROPOSED GRANT
IN THE AMOUNT OF US$5.0 MILLION
FROM
THE SPECIAL CLIMATE CHANGE FUND
(ADMINISTERED BY THE GLOBAL ENVIRONMENT FACILITY)
TO
EUROPA REINSURANCE FACILITY (EUROPA RE)
FOR THE
KAZAKHSTAN: SOUTHEAST EUROPE AND
CENTRAL ASIA CATASTROPHE RISK INSURANCE FACILITY
July 22, 2014
.
Vice President: Laura Tuck
Country Director: Saroj Jha
Sector Manager: Aurora Ferrari
Sector Director: Gloria Grandolini
Task Team Leader: Eugene Gurenko
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents
may not otherwise be disclosed without World Bank authorization.
.
PCN DATA SHEET
.
Southeast Europe and the Central Asia
Catastrophe Risk Insurance Facility
.
PROJECT CONCEPT NOTE
.
Europe and Central Asia Region
.
Basic Information
Date:
July 22, 2014
Sectors:
Financial Sector / Insurance; Climate Change and DRM
Country Director:
Saroj Jha
Themes:
Other financial and private sector development (50%); Natural
disaster management (20%); Climate change (30%)
Sector Manager/Director: Aurora Ferrari
EA Category:: B
Project ID:
TBD
Lending Instrument:
Adaptable Program Loan
Team Leader(s):
Eugene N. Gurenko
Joint IFC: No
Project Implementation Period:
Start Date: March 1, 2015
End Date: December 31, 2018
.
Project Financing Data
[ ]
Loan
[ X ] Grant
[ ]
Credit
[ ]
[ ]
Other
Guarantee
For Loans/Credits/Others (US$M):
Total Project
Cost : $5.0
$5.0
Total
Cofinancing :
Total GEF/SCCF
Financing :
$5.0
0.0
Financing Gap :
0
.
Financing Source
Amount
(US$ Million)
BORROWER/RECIPIENT
IBRD
IDA: New
IDA: Recommitted
Others
GEF/SCCF
5.0
Financing Gap
Total
5.0
.
Borrowers: Europa Re
Responsible Agency: Europa Re
Contact:
Mr. Heinz ChristianVollenweider
Telephone No.: +(41) 41 728 63 63
.
Title:
Europa Re, Delegate of the BoD and CEO
Email: Heinz.Vollenweider@Europa-Re.com
SOUTHEAST EUROPE AND CENTRAL ASIA
Southeast Europe and Central Asia Catastrophe Risk Insurance Facility
.
I. Introduction and Context
A. Country Context
1. Globally, economic losses from climate-related and geological perils are rising,
exceeding US$100 billion per annum over the last decades. In 2013, the economic losses
caused by natural disasters amounted to US$ 125 billion, while the average economic
loss for period from 1980 to 2012 was US$ 115 billion1. In addition to the economic toll,
natural disasters have been the source of death, disability, and loss of physical and
productive assets.
2. Kazakhstan is vulnerable to natural hazards including earthquakes, floods, landslides/
mudslides/debris flows, and steppe winds. Climate change is expected to exacerbate
disasters caused by the impact of natural hazards associated with hydro-meteorological
conditions, with associated damage particularly impacting homeowners, small and
medium business (SMEs), and farmers. With a total area of agricultural land of 222.6
million hectares, agriculture plays a prominent role in the national economy but also
making the country highly vulnerable to the risk of climate change. In 2012, for instance,
the country experienced a 54 percent fall in wheat production due to an unprecedented
drought. The individual natural disaster risk profile of Kazakhstan is summarized below.
3. Historically, Kazakhstan has experienced highly damaging earthquakes, which tend to
occur every 80 to 100 years. The last highly damaging period of seismic activities was
1885-1911, when several large earthquakes struck at Verneskoye (1887), Chilik (1889)
and Keminskoye (1911). During these earthquakes, the city of Almaty was almost
flattened. The more recent Zhambyl province earthquake in May 2003 killed 3 people
and affected 36,626 others.
4. Floods, landslides and steppe winds also pose significant hazards in Kazakhstan. In the
plains, spring floods fed by rain and snowmelt occur and mountainous regions suffer mud
flows triggered by rainfall or breaches of glacial lakes. Analysis of disaster data shows
that the country suffers from frequent floods. Flood events include the June 1993 flood in
the Embinskyi-Kzylkoginskyi region, which killed 10 people, affected 30,000 others and
caused an economic loss of $36.5 million. The April 2000 flood in the DenisovskyZhitikarinsky region affected 2,500 people and caused an economic loss of $1.5 million
and the March 2005 flood in the Shiyeli-Syr Dariya region affected 25,000 people and
caused an economic loss of $7.6 million. The March 2004 landslide in Talgar district
1
Munich RE NatCatSERVICE, 2014
(http://www.munichre.com/site/corporate/get/documents_E833834344/mr/assetpool.shared/Documents/0_Corporate%20Website/6_Media%20Rela
tions/Press%20Releases/2014/natural-catastrophes-2013-wold-map_en.pdf)
reportedly killed 48 people2.
5.
6. To address the impact of natural disasters on homeowners and SMEs, the government is
introducing a new Law on Compulsory Catastrophe Insurance. Preparations for the draft
law are currently underway under a separate program of Bank technical assistance
financed by FIRST.3 A risk insurance scheme for agriculture was introduced in 2004 as a
traditional policy response to deal with catastrophic and weather. However, according to
a recent report4, the current crop insurance scheme in Kazakhstan requires a major
overhaul to improve its performance and a better disaster insurance framework should be
developed to deal with natural disasters in agriculture sector.
B. Sectoral and Institutional Context
7. Despite the high vulnerability to natural disasters and climate change, catastrophe and
weather insurance among homeowners SMEs is currently underdeveloped in Kazakhstan.
The catastrophe insurance products that do exist are either not viable in terms of price
and coverage or restricted only to selected clients as companies ration the availability of
catastrophe coverage through higher prices or simply decline to cover weather and
earthquake related risks. As a result, less than 2 percent of insurable properties are
currently insured and fewer SMEs. To address the problem, the government is
introducing a national program of compulsory catastrophe insurance for homeowners and
SMEs. To this effect, the Bank is assisting the government with the preparation of the
Disaster Insurance Law and development of actuarially sound premium rates under a
separate TA program financed by FIRST and JERP. Yet, the establishment of a proper
national catastrophe insurance program requires a highly advanced catastrophe insurance
market infrastructure (innovative catastrophe risk insurance products, automated
underwriting an pricing insurance services, advanced insurance IT systems to support
sales and claims management, public awareness of catastrophe and weather risk, and
other technical insurance specific functions) which is currently not in place.
8. Relying on the global experience in designing national and regional catastrophe and
weather-risk insurance programs, with the aim of increasing the number of insured
against weather related risks, jointly with the United Nations International Strategy for
Disaster Reduction (UNISDR), the Swiss Secretariat for Economic Affairs (SECO) and
the Global Environmental Facility (GEF), in 2011, the World Bank launched a
catastrophe and weather risk reinsurance program entitled SEEC CRIF. The main
rationale of SEEC CRIF is to promote the development of local catastrophe and weather
risk insurance markets in disaster prone emerging economies that will increase access of
local businesses and population to reliable and fairly priced catastrophe and weather risk
insurance products which currently cannot be found in the commercial insurance market.
Based on such an approach, SEEC CRIF, in cooperation with country stakeholders has
already financed the development of catastrophe insurance market infrastructure for
2 Disaster Risk Management Initiative (CAC DRMI) Risk Assessment for Central Asia and Caucasus Desk Study Review
3
4
Financial Sector Reform and Strengthening Initiative
OECD Review of Agricultural Policies, Kazakhstan 2013
Albania, Serbia and Macedonia, which are now launching the sales of innovative
catastrophe products supported by the most advanced insurance technologies and public
disaster risk awareness building educational tools.
9. Based on the valuable experience and specialized insurance expertise developed under
the SEEC CRIF in designing effective catastrophe and weather insurance market
infrastructure and national catastrophe insurance markets, the Bank now would like to
extend the outreach of the program to Kazakhstan and, at a later stage, to other countries
of Central Asia. Phase II of SEEC CRIF Program – Southeast Europe and Central Asia
Catastrophe Insurance Facility (SEECA CRIF) - aims to provide comprehensive
technical support to the government of Kazakhstan in preparing the launch of the national
program on compulsory catastrophe insurance for homeowners and SMEs and providing
further assistance in developing effective weather insurance solutions for agriculture to
enable the country’ economy better adapt to the growing risk of climate change.
C. Relationship to SCCF and GEF Strategies and CPS
10. Of the current Country Partnership Strategies (CPS) for Kazakhstan, disaster risk
management and adaptation to climate change were addressed through a stand-alone
project during the CPS period and identified as government priorities in future
programming. Disaster risk financing, including catastrophe and weather-risk insurance,
is one of the main pillars of the Bank Group’s Disaster Risk Mitigation Strategy. The
Kyoto Protocol, the UN Framework Convention on Climate Change and the Bali Action
Plan all call for risk sharing and transfer mechanisms such as insurance as a means of
protecting populations from the adverse effects of climate change.
II. Proposed PDO/Results
A. Proposed Development Objective(s)
11. The Project Development Objective (PDO) is to assist Kazakhstan with developing
modern catastrophe insurance market infrastructure that will support the launch and
successful implementation of the national catastrophe insurance program covering
climate risk and geo-hazards.
12. By facilitating and increasing access to financial protection, the Global Environmental
Objective (GEO) will have been achieved, namely the reduction of economic
vulnerability for homeowners, the enterprise sector, and government agencies to the
adverse impact of natural disasters and climate change. The proposed project activities
support GEF’s focus on climate change and more specifically, GEF’s objectives on
climate change adaptation. By increasing access to sound catastrophe and weather risk
insurance products, SEECA CRIF is also in line with the GEF strategy on adaptation. By
supporting proper catastrophe risk management and risk transfer, SEECA CRIF reduces
economic losses at both local and national level from extreme weather related events,
thereby reducing economic vulnerability and creating a more climate resilient country.
13. SEECA CRIF activities are also cross-cutting and collaborative, ensuring the engagement
of major stakeholders in Kazakhstan, including several ministries, the National Bank,
insurance sector and agriculture. Moreover, because much of the technical work will be
focused on establishing complex catastrophe insurance infrastructure and systems,
stakeholders will gain the requisite skills and knowledge to better understand catastrophe
risk and effectively adapt to such risks and climate change. Furthermore, public
awareness of climate change and the benefits of catastrophe and weather risk insurance
will be raised through information campaigns and the new law on compulsory Disaster
Insurance and supporting its regulations, resulting in increased demand for catastrophe
and weather risk insurance products.
B. Key Results
14. The most important result of SEECA CRIF in Kazakhstan is the increased access to
sound and affordable weather risk coverage and catastrophe insurance for millions of
people and thousands of SMEs, including agricultural producers. The modern catastrophe
insurance infrastructure developed under the SEECA CRIF will support the launch of the
forthcoming national catastrophe insurance program that will increase catastrophe and
weather-risk insurance penetration among homeowners and enterprise sector in
Kazakhstan from the current 1-2 to 60 percent over the next 5 years.
III. Project Context
A. Concept
a). Description
15. SEECA CRIF is a catastrophe and weather-risk insurance program established to address
the problem of low catastrophe and weather insurance penetration in participating
countries. The main rationale of the project is to promote the development of sound
catastrophe and weather risk insurance for millions of homeowners, farmers, enterprises
and government organizations against geo and weather-related risks exacerbated by
climate change and reduce government fiscal risk exposure to natural disasters.
16. The main design features of SEECA CRIF closely follow the previous prototypes of
national and regional catastrophe and weather-risk programs developed with direct
technical and capital assistance from the Bank – the Turkish Catastrophe Insurance Pool,
the Romanian Catastrophe Insurance Pool and the Caribbean Catastrophe Risk Insurance
Facility. However, the program contains several innovations. These include (i) the
development of innovative catastrophe insurance products which combine traditional
indemnity coverage with parametric index-based elements; (ii) establishment of prudent
risk management and market conduct requirements embedded in highly automated
systems, (iii) development of innovative image-based claims management systems
ensuring a swift return to normal life or continuation of business activities in the
aftermath of a natural disaster; (iv) introduction of risk based supervision of catastrophe
insurance in line with best international practices, (v) development of innovative public
awareness and educational mechanisms, including highly interactive IT applications and
(vi) ensuring proper financial capacity through dedicated reinsurance capacity.
17. Europa Reinsurance Facility Ltd. (Europa Re), a government-owned catastrophe
reinsurance company incorporated under Swiss Law in Zug, Switzerland, will act as the
SEECA CRIF project implementation agency. Over the last 3 years, in the course of
implementing the GEF and SECO grants under the SEEC CRIF program in Albania,
FYR of Macedonia and Serbia, Europa Re developed extensive and in-depth expertise in
retaining and successfully managing specialized providers of insurance services in
accordance with the World Bank procurement and financial management guidelines. In
the case of SEE, the GEF and SECO grants in the amount of $10 million were used to
develop innovative catastrophe insurance products and underlying them hazard risk
models, procure web-based automated pricing, underwriting and policy origination
platform, claim management systems and provide regulatory support to local insurance
regulators. Given the importance of providing reinsurance capacity to local insurance
companies involved in sales of catastrophe insurance products developed under the
SEECA CRIF program, Europa Re also will stand ready to provide, if required,
reinsurance support to the Kazakh insurance companies that will be participating in the
national catastrophe insurance program and, if requested, directly to the Kazakhstan
Catastrophe Insurance Pool (KCIP).
18. In the case of SEECA CRIF program for Kazakhstan, the proposed funding of US$5.0
million will be used for procuring insurance services and systems that will (i) pave the
way for the successful launch of the KCIP’s operations upon enactment of the Disaster
Insurance Law and (ii) support the development of a sustainable insurance framework for
the agricultural sector through innovative insurance solutions and modern technologies.
Inter alia, the activities include procurement of web-based insurance sales platform with
automated pricing and risk underwriting capabilities, a modern claims management
system, high-resolution weather risk data, development of customized weather insurance
products for real property and agriculture, public information campaigns, interactive
web-based consumer education tools, and insurance regulatory assistance.
b). Description of Main Project Activities
19. The total Project cost for Kazakhstan is estimated at US$5.0. The costs will be funded by
the GEF / SCCF. Under this project, the GEF funding will provide requisite technical and
regulatory assistance to the government of Kazakhstan required to develop new insurance
products that will increase the country’s resilience to climate change. GEF funding will
support technical activities that will not only help quantify climate change in the context
of catastrophes and weather-risk, but also develop insurance products to assist those at
risk to adapt and become more resilient to climate change.
20. The proceeds of the GEF/SCCF grant will finance the costs of technical services incurred
in connection with carrying out the preparatory work needed for the development of
catastrophe weather risk insurance market in Kazakhstan. Such preparatory technical
activities include but are not limited to acquisition of weather risk data, design of
catastrophe risk models and high-resolution risk maps, acquisition of an automated web-
based IT platform to support efficient insurance sales and claims settlement, public
information campaigns, assistance to the national insurance regulators, consumer
education on disaster insurance and professional training of insurance agents and
insurance loss adjustors. Table 1 summarizes the main technical activities that will be
financed under the project subject to confirmation and amendment during project
preparation.
Table 1 – Financing Overview of Main Project Activities
Component
Total
SCCF
0.45
0.45
0.3
0.3
3. Development of catastrophe claims management system
0.4
0.4
4. Development of integrated IT web-based platform for sales and claims management
2.5
2.5
5. Development of interactive web-based portal for disaster risk assessment and public
education
0.3
0.3
6. Development of promotion and public relation strategy
0.3
0.3
7. Development of risk management capabilities of KCIP
0.1
0.1
8. Regulatory assistance to National Bank
0.2
0.2
9. Project Management Costs
0.45
0.45
Total
5.00
5.00
1. Acquisition of Weather Risk Data and Development of Weather Risk Models
2. Design and pricing of catastrophe and agricultural insurance products
c). Key Risks and Issues
21. The success of the project ultimately depends upon (a) enactment of the law on national
compulsory property insurance and (b) proper cooperation among the main stakeholders
during the implementation of the project and (c) timely and quality delivery of main
elements of market insurance infrastructure envisaged under the program.
Hence, the main risks faced by the project are as follows:

Delays with enactment of the Law on Compulsory Property Catastrophe Insurance
by the Parliament or removal of important technical provisions of the draft law in
the process of Parliamentary hearings. This risk is considered moderate as it is
mitigated by the strong government commitment to present the draft law to the
Parliament in January 2016, as well as the ongoing World Bank TA project that will
be providing the government with technical guidance and support during the
process of Parliamentary hearings of the Law. Finally, the proposed 3 year timeframe for project implementation should provide sufficient risk buffer for potential
delays with the enactment and implementation of the law.

Failure of key project stakeholders to coordinate their actions in the process of
project implementation that results in the lack of adequate government ownership
for the project. The risk is considered moderate as the government already assigned
the task of preparing the law to the Ministry of Economic Development and
Planning which is now the main counterpart of the Bank under a separate ongoing
separate TA project in support of the national catastrophe insurance program. The
design of the program’s governance also envisages the representation of all key
project stakeholders at the Board of Directors of the national catastrophe insurance
pool.

Failure of timely and quality delivery of main building blocks of market
infrastructure required for the launch of the national catastrophe insurance
program. This operational risk can be considered low despite extensive and
complex scope of preparatory technical work required for the program launch, as
the project will be managed by a highly experienced in the insurance business
project implementation agency – Europa Re, which delivered on time and within
budget a similar technical program in SEE.
B. Implementing Agency Assessment
22. As numerous technical activities financed by the project require highly specialized
insurance and reinsurance expertise to ensure their completion on time and to the
specifications, it is crucial that the implementation of the project is carried out by an
experienced and technically competent (in insurance and reinsurance) project
implementation agency. In addition, to achieve satisfactory compliance with the World
Bank project implementation guidelines in the areas of procurement, disbursement and
financial management, it is also essential that the project implementation agency has the
established successful track record in managing similar Bank projects in the past.
23. To this effect, the project will be managed by Europa Re which will act as the recipient
of the SCCF grant and its implementing agency. It will also act as the main Bank and
government counterpart for the purposes of project execution. Europa Re, a specialized
catastrophe reinsurance company established under the Swiss Law with extensive
technical support from the World Bank, is currently owned by the governments of
Albania, FYR of Macedonia and Serbia. Since 2012, Europa Re has been successfully
acting as the project implementation agency for the US$ 5.5 million GEF and US$ 4.5
SECO grants under the SEEC CRIF program, which financed the development of
catastrophe insurance market infrastructure in Southeastern Europe. Since the inception
of the project in 2012, Europa Re has been consistently receiving satisfactory ratings for
the high quality of its financial management and procurement operations. Europa Re
employs a tested cadre of procurement and financial management professionals that
ensure full compliance with the Bank Guidelines and procedures.
24. In its capacity of the project implementation agency (PIU) Europa Re will prepare
technical specifications for technical services essential for the successful launch of the
Kazakh national catastrophe insurance program and development of innovative
catastrophe insurance products. Europa Re insurance and reinsurance professionals will
then provide day-to-day oversight of the implementation of all technical activities
financed under the grant to ensure their timely and professional completion.
25. Although owned by the governments, Europa Re’s governance setup ensures that the
management of Europa Re is immune from potential political pressures that may
adversely affect its day-to-day operations. One of the key elements of the company’s
governance structure is a clear separation of the company’s business operations from the
ownership of the Facility. To this effect, Europa Re has an independent professional
board of directors consisting of reputable insurance/reinsurance professionals with a
well-established track record in the industry and a professional highly experienced senior
management team.
26. Europa Re will produce quarterly technical reports about progress made with
implementation of numerous technical activities envisaged by the project and will
provide annual audited financial reports on the utilization of donor trust funds. Results of
the project activities will be monitored and evaluated by Europa Re on the regular basis.
27. Project procurement will be handled by Europa Re, which is handling the current
ongoing project in Southeastern Europe. During procurement capacity assessment the
team will review the internal controls, complaint handling and decision making process
more closely. The project procurement will be mainly consultancy contracts.
C. Project Stakeholder Assessment
28. The project will bring together a broad spectrum of stakeholders within the country,
including, inter alia, policy makers, ministerial/institute/agency staff, insurance sector,
and other. The concept of the national catastrophe insurance program has been supported
by all stakeholders met thus far, including the government and the insurance industry.
During the preparation of the project, consultative meetings were held at different levels
where stakeholders reiterated the importance of the proposed project and the economic
and social benefits that would accrue to the population and the government.
29. The Bank has maintained an ongoing dialogue with all potential stakeholders and is
ensuring that project preparation and implementation will be undertaken in close
consultation with potential beneficiaries.
D. Overall Risk Rating Explanation
30.
The overall risk rating is moderate. The decision has already been taken by the
government of Kazakhstan to develop the national catastrophe insurance program, whereas the
introduction of new weather risk related products for agriculture is in synch with the country’s
strategic priorities. World Bank technical support with the preparation of the draft law and Europa
Re technical oversight of insurance work financed under the project provide sufficient assurances
that the project will be effectively implemented.
E. Proposed Team Composition and Resources
Team Composition and resource estimate (from preparation to approval)
Staff Name
Title
SWs
Eugene Gurenko
Ignacio Jauregui
TBD
Galina Alagardova
Nurbek Kurmanaliev
Pablo Souto
Thelma Aymel
Rakhymzhan Assangaziyev
Lead Insurance Specialist, Task Team Leader
Legal Counsel
Finance Officer
Financial Management Specialist
Procurement Specialist
Consultant
Senior Program Assistant
Country Officer
4
1
1
1
1
4
1
2
It is estimated that a total of 15 Staff Weeks will be required from preparation to approval. This
represents an estimated budget of about $80,000, including travel.
Annex 1-Operational Risk Assessment Framework (ORAF)
Stage: PCN
1.
Project Stakeholder Risks
Rating
M
Risk Management: This risk is considered moderate as it is mitigated by strong government commitment
to present the draft law to the Parliament in January 2016, as well as the ongoing World Bank TA project
that will be providing the government with technical guidance and support during the process of
Parliamentary hearings of the Law. The process shall be closely monitored by the Bank and on-site
missions. The proposed 3 year time-frame for project implementation provides sufficient risk buffer for
potential delays with the enactment and implementation of the law.
Resp:
Bank,
Stage: Preparation
Due Date : Recurrent
Status: Not Yet Due
Recipient
and Implementation
2. Operating Environment Risks (Note for information: this section is not disclosed at negotiation and Board presentation stages)
2.1. Country (Note for information: this section is not
Rating:
M
disclosed at negotiation and Board presentation stages)
5
Description : Medium-term prospects are good, offering an Risk Management: Ongoing technical assistance and trainings are provided by the the IMF and Bank to
excellent opportunity to bolster the policy architecture. Average address the downside risks. In view of limited progress on NPLs, the authorities have adopted an
growth of 8 percent over the past decade, supported by rising increasingly proactive posture, including tax exemptions on written-off loans for banks.
oil output and prices, has solidified Kazakhstan’s position as a The NFRK, in addition to ensuring intergenerational equity, could support stability by being used to arrest
regional economic power. Following rapid economic recovery any sharp deceleration in growth in the event of large negative shocks.
from the 2007-08 crisis, growth has decelerated but remains Reducing the economy’s dependence on oil remains a primary objective for the country. To this effect,
solid, and is expected to rise slightly in 2013 to around 5¼ the government has developed a strategy of economic diversification based on prioritization of other
percent.
sectors of economy, including agriculture.
There are some downside risks to the outlook, primarily
emanating from the external environment. A potential Resp:
Bank,
Stage: Preparation
Due Date : Recurrent
Status: Not Yet Due
slowdown in the global economy and lower oil prices than Recipient
and Implementation
currently projected would negatively affect external demand
and growth. Close trade, investment, and financial links with
Russia and China make Kazakhstan particularly vulnerable to
shocks affecting these economies.
Like other emerging market economies, Kazakhstan is also
prone to reversal in short-term capital flows; however, the Resp:
Bank
Stage: Prep and Impl
Due Date : Recurrent
Status: Not Yet Due
vulnerability associated with external borrowing by banks has
declined markedly in recent years. Continued reliance on oil
and the still unresolved NPLs issues in the banking sector are
key sources of domestic vulnerabilities.
Description: Delays with enactment of the Law on
Compulsory Property Catastrophe Insurance by the Parliament
or removal of important technical provisions of the draft law
during its review by several stakeholders and/or Parliamentary
hearings may pose a risk during implementation phase or after
project completion.
2.2.
5
Sector/multi-sector (Note for information: this section
Rating:
M
This section relies on the IMF’s document: Republic of Kazakhstan, 2013 Article IV Consultation
is not disclosed at negotiation and Board presentation
stages)
Description: The development and implementation of project
components requires close and effective cooperation with a
spectrum
of
stakeholders,
including,
inter
alia,
ministerial/governmental/, insurance regulator and insurance
sector.
Failure of key project stakeholders to properly coordinate their
actions in the process of project implementation may result in
the lack of adequate government ownership for the project.
3.
Implementing Agency Risks (including fiduciary)
3.1. Capacity
Risk Management :
The stakeholders currently engaged are aware of the importance of the national catastrophe program and
Coordination has already started. To this effect, the government assigned the task of preparing the law to
the Ministry of Economic Development and Planning which is now the main counterpart of the Bank
under a separate ongoing separate TA project in support of the national catastrophe insurance program.
The design of the program’s governance also envisages the representation of all key project stakeholders
at the Board of Directors of the national catastrophe insurance pool.
Resp:
Rating:
Bank
Stage: Preparation
and implementation
Due Date : By PAD
stage
Status: Not yet due
L
Description : Europa Re will act as the recipient of the SCCF
grant and its implementing agency.
Risk of Insufficient Project Management Capacity: The risk is
low as Europa Re has already gained experience through
implementation of a similar project in other countries Albania,
FYR Macedonia and Serbia and has been successfully acting as
the project implementation agency for the US$ 5.5 mm GEF
and US$ 4.5 SECO grants under the SEEC CRIF program,
which financed the development of catastrophe insurance
market infrastructure in these countries. Since 2012, Europa Re
has been consistently receiving satisfactory ratings for the high
quality of its financial management and procurement
operations.
Risk of Insufficient Technical Capacity: As numerous technical
activities financed by the project require highly specialized
insurance and reinsurance expertise to ensure their completion
on time and to the specifications, the overall project
implementation will be managed by Europa Re with successful
track record in managing similar Bank projects in the past
through a highly qualified team of experts in areas of
insurance, reinsurance, agriculture, catastrophe and weather
risk modelling, actuarial, information technology, risk and
financial management and other relevant areas pertaining to the
project. Therefore, failure of timely and quality delivery of
main building blocks of market infrastructure required for the
launch of the national catastrophe insurance program can be
considered low, despite the extensive and complex scope of
Risk Management :
Since 2012, Europa Re has been consistently receiving satisfactory ratings for the high quality of its
financial management and procurement operations. Europa Re employs a tested cadre of procurement and
financial management professionals that ensure full compliance with the Bank standards. It is envisaged
that Europa Re will continue to maintain the same level of expertise and professionalism in full
compliance with Bank procurement and financial management standards.
Europa Re will build on its positive experience to implement the project by employing a qualified team
of experts in areas of insurance, reinsurance, agriculture, catastrophe and weather risk modeling, actuarial,
information technology, risk and financial management and other relevant areas pertaining to the project.
Resp: Bank,
Recipients
Stage: Implementation
Due Date : Recurrent
Status: Not Yet Due
preparatory technical work required for the program launch.
FM: Input from specialist to be received.
3.2.
Governance
Description: Europa Re has an independent professional board
of directors consisting of reputable insurance/reinsurance
professionals with a well-established track record in the
industry and a professional highly experienced senior
management team.The implementing agency’s setup ensures a
high level of professionalism, independence and immunity
from potential pressures that may adversely affect its day-today operations.
Fraud & Corruption (sub-category of Governance risk)
(Note for information: this section is not disclosed at
negotiation and Board presentation stages, except the risk
Management measures which will be merged with those on 3.2
Governance)
Description: There is little likelihood that this risk will
materialize due to the very nature of the company’s
organization and ongoing monitoring by various
stakeholders.
4.
Rating:
L
Risk Management :
One of the key elements of the implementing agency’s governance structure is a clear separation of the
company’s business operations from the ownership. Furthermore, the governance and operational
procedures are subject to ongoing monitoring by the Bank.
Resp:
Bank
Stage: Implementation
Due Date : Recurrent
Status: Not Yet Due
Rating:
L
Risk Management : Europa Re is managed according to the rules and procedures established by the
company’s Operations Manual (which was approved by the Bank). GEF funds will be subject to the
same Operations Manual. Furthermore, company has established the internal audit function and is
subject to an annual external audit, Swiss regulator’s, shareholders’, and Bank supervision by the
FM and procurement teams.
Resp:
Bank,
Stage: Preparation
Due Date : Recurrent
Status: Not yet due
Governments
and implementation
Project Risks
4.1.
Design
Description: A risk may arise due to insufficient understanding
of specific country requirements during the design of specific
project components by the implementing agency.
The risk of flawed design is moderate although the project is
highly complex. Europa Re has acquired valuable expertise and
experience in designing similar projects which have been
implemented effectively in other countries.
4.2. Social & Environmental
Description :
The program is designed to improve access to catastrophe and
weather-risk insurance products for homeowners and SMEs by
transferring the financial risk to the private sector, thus
Rating:
M
Risk Management: To address the risk, the implementing agency will use the already gained experience
from other similar projects and establish close communication with relevant country stakeholders to
incorporate country specific requirements into project design.
Resp:
Recipients
Bank,
Stage: Prep and Impl
Due Date : Recurrent
Status: Not Yet Due
Rating:
L
Risk Management : Social:
No environmental risks. Social issues include affordability/coverage of the poorest and most vulnerable
populations. The affordability of insurance coverage for the most socially vulnerable groups will be
addressed through a special insurance voucher program financed by the government.
enabling the government to better target post disaster assistance
to the socially vulnerable groups. Due to the compulsory nature
of the program, the insurance premium rates are expected to be
highly affordable.
4.3. Program & Donor
Description : Lack of donor funding for necessary technical
work required for project implementation and public awareness
campaigns will pose a risk.
4.4.
Delivery Monitoring & Sustainability
Description: There is a risk of project outcomes being
unsustainable upon completion of grant financing and
inadequate monitoring of project outcomes.
Resp:
Bank,
Recipient
Stage: Implementation
Due Date : Recurrent
Status: Not Yet Due
Rating:
L
Risk Management: The SCCF grand will cover the cost of main activities required for the project
implementation.
Resp:
Bank,
Stage: Preparation
Due Date : Recurrent
Status: Not Yet Due
Recipient
and Implementation
Rating:
M
Risk Management: To mitigate the sustainability risk, the national catastrophe insurance law (which is
being developed under another Bank’s TA) establishes the KCIP as an ongoing concern and imposes clear
fit and proper criteria for executive management of the KCIP and its technical service providers.
The risk of sustainability is low, as the KCIP will be
established as a going concern by the law and will rely on the
constant of insurance premium to finance its costs.
The risk of inadequate monitoring is addressed by Europa Re’s
clear operating procedures and technical experience with
delivering similar projects on time and within budget to
required technical specifications.
Resp:
Recipient
Bank,
Stage: Implementation
Due Date : Recurrent
Status: Not Yet Due
Non-disclosable Information for Management Attention (Optional) (Note for information: this section is not disclosed at negotiation and Board presentation stages)
Comments:
5.
Project Team Proposed Rating Before Review
5.1. Preparation Risk Rating: Low
Comments: There is a risk of delayed or poorly conceived project preparation.
The risk of inadequate project preparation is low due to an experienced project
preparation team and government commitment to the launch of the national
catastrophe insurance program within the earliest time-frame. Cooperation with
country stakeholders and on-site missions will complement the desk preparation
work to ensure that the project is prepared on time and in compliance with
relevant Bank procedures.
6.
Risk Team
6.1. Preparation Risk Rating
5.2 Implementation Risk Rating: Moderate
Comments: The overall project implementation will be managed by Europa Re with
successful track record of managing similar Bank projects in the past. The company
employs an experienced team of experts in areas of insurance, reinsurance, agriculture,
catastrophe and weather risk modelling, actuarial, information technology, risk and
financial management and other relevant areas pertaining to the project.
To mitigate implementation risks, the implementing agency will clearly define
responsibilities of all project stakeholders, ensure effective cooperation towards the
completion of the project on time and to the specifications.
6.2 Implementation Risk Rating
7.
Comments:
Comments:
Overall Risk Following Review
7.1. Preparation Risk Rating:
Comments:
7.2 Implementation Risk Rating:
Comments:
Note: Include on average no more than 3 Risk Management Measures per Risk Category
Annex II
Preparation Schedule and Resources
.
Preparation Schedule
Milestone
Basic
AIS Release
2014
Concept Review (IW)
August 6, 2014
Concept Review (SCCF)
Forecast
Actual
August 6, 2014
August 6, 2014
August 8, 2014
Auth Appr/Negs (in principle)
Bank Approval
October 2014
October 2014
December 2014
December 2014
.
Sector Unit Estimate of Resources Required from Preparation through Approval
Estimate of Resource Requirements (USD)
Preparation Expenses to Date
(USD)
Source of Funds
Fixed
Variable
Bank Budget
0
50,000
30,000
Trust Funds
0
0
0
.
Team Composition
Bank Staff
Name
Title
Specialization
Unit
UPI
Eugene Gurenko
Task Team Leader
Insurance
GFMDR
82643
Rakhymzhan Assangaziyev
Country Officer
Operations
ECCKZ
Thelma Aymel
Program Assistant
Administrative support
GFMDR
Pablo Souto
Consultant
Financial sector
Galina Alagardova
Financial Management Specialist
Financial Management
GGODR
Nurbek Kurmanaliev
Procurement Specialist
Procurement
GGODR
TBD
Disbursement Specialist
Financial Management
Ignacio Jauregui
Legal Counsel
Legal
LEGLE
Non Bank Staff
Name
Title
Office Phone
City
Attachment III: Description of Co-financed /Parallel Activities and Their Implementation and Coordination Arrangements
Activity
Development of the draft insurance law for the national
catastrophe insurance program and development of actuarial
pricing for EQ risk.
Collection of data on historic budgetary outlays on natural
disasters
Budgetary planning for emergencies
Funding
FIRST
Kazakhstan
Ministry of Economic
Development and Planning
JERP
Ministry of Economic
Development and Planning
Ministry of Economic
Development and Planning
GFDRR