RFP_003_2025_Natl consultancy firm developing diagnostic report micro-insurance

Lao PDR’s growth vision has been centred on becoming the “the battery of ASEAN” and a “Land-linked” economy. Over the past two decades, the country has achieved impressive growth, with poverty rates declining from 33.5 per cent in 2002-2003 to 18.6 per cent in 2018-2019. Between 1990 and 2022, its Human Development Index (HDI) value increased by 52%, reflecting significant progress in life expectancy, education, and income. Sustained socio-economic progress enabled Lao PDR to meet the criteria for graduation from Least Developed Country (LDC) status, with graduation expected in 2026. The progress, despite significant and impressive, masks underlying structural problems, as growth relies heavily on natural resource sectors and external borrowing, leaving the economy vulnerable.

Lao PDR is highly vulnerable to floods, droughts, and extreme weather events, which are becoming increasingly frequent and intense due to climate change. Ranked 6th globally for flood risk, the country experiences widespread damage from flash floods driven by southwest typhoons and northeast monsoons. The 2018 floods caused by Tropical Storm Son-Tinh exemplify the devastating impacts, resulting in USD 147 million in damages and USD 224 million in losses, affecting over 600,000 people and reducing GDP by 2%. While lowland communities along the Mekong River are particularly exposed to severe flooding, upland regions face growing challenges from drought, leading to water scarcity and agricultural losses. Rising temperatures further compound these risks by reducing crop yields and threatening food security.

Agriculture, which supports over 90% of rural households and serves as the primary livelihood for 62% of the population, is especially vulnerable to climate change. Floods and droughts disrupt production, destroy crops, and exacerbate food insecurity, often forcing households into debt. During the 2018 floods alone, the agricultural sector accounted for 57% of total economic losses. Micro, small, and medium enterprises (MSMEs), which play a vital role in the economy, also suffer from climate-related disruptions, including damaged infrastructure and reduced productivity, further weakening economic resilience.

To enhance Lao PDR’s capacity to access international climate finance and align it with domestic public finance, as well as leverage private finance, UNDP aims to strengthen the evidence base for climate financing by conducting key studies and initiatives. These for developing a diagnostic report on micro-insurance provision in Lao PDR, loss and damage country-wide diagnostic study, climate-proof investment facility for MSMEs and adaptation investment in water-related risk reduction, with the aim to address the susceptibility of the underserved and vulnerable groups including rural farmers, ethnic groups and MSMEs

The insurance market in Lao PDR is underdeveloped, particularly for vulnerable groups like farmers, who face low financial inclusion and limited access to formal banking. This limits their ability to recover from climate-related shocks. Affordable micro-insurance can enhance resilience and protect livelihoods from increasing climate disasters.

The main objective of this assignment is to deliver a comprehensive diagnostic report on microinsurance provision in Lao PDR. This includes a diagnostic study to assess the supply and demand, enabling environment and regulatory framework through desk review, stakeholder consultations, field consultations and implement a pilot. The study will also provide feasible recommendations to scale micro-insurance coverage through regulatory incentives, innovation and with a focus on private sector financing solutions. 

The successful firm will be expected to be responsible for the following:

Task 1 Conduct a scoping and present the current status of micro-insurance provision in Lao PDR

·         Analyze and present the hazard contexts of Lao PDR using desk review and latest data

·         Conduct a mapping of local and foreign insurance providers including micro finance institutions, agents, brokers.

·         Collect information on available products, distribution channels, depth of coverage and on any pilots that have taken place. Examine the lessons from ongoing or past pilots. Examine if any digital or other innovative tools have been deployed. Examine if there are any government and or development partner subsidized products.

·         Conduct a mapping of line ministries, financial sector and insurance regulators and insurance provider associations in Lao PDR

·         Examine any incentives or regulatory guidance on inclusive insurance or micro-insurance in Lao PDR including legislations on insurance and legislations on financial inclusion. Assess any regulatory grey areas on micro-insurance provision.

·         Validate desk review information with stakeholder consultations (ensure stakeholders identified in the above-mentioned mapping were consulted).

·         Provide a list of recommendations based on key findings from desk review and consultations to strengthen the supply context.

·         Identify options for insurance providers both foreign and local to venture into micro-insurance market in Lao PDR.

·         Provide reflections on inclusive insurance i.e commercial insurance service providers providing coverage for underserved segments of the population.

Task 2: Examine the level of demand for insurance among low-income and rural populations

·         Assess the gaps in coverage and risks that are not/ insufficiently covered either by the national social security programme or traditional commercial insurance

·         Assess the level of coverage of rural populations by type of inclusive insurance

·         Assess the literacy on insurance

·         Assess the factors contributing to the level of awareness that exists

·         Validate desk review information with community-based consultations covering at least 2-3 provinces

·         Provide a list of recommendations based on key findings from desk review and consultations to strengthen the outreach including education materials, awareness raising and the role of insurance providers, agents, distribution channels.

Task 3: Design and pilot test building on existing products amongst 2 or 3 small communities

·         Review the findings from Task 1 and 2

·         Examine best practices and good examples from other country contexts including innovative delivery of microinsurance in similar contexts to Lao PDR

·         Design an insurance product /microinsurance business model based on the findings available

·         Test the provision of the product in selected communities

Gauge implementation lessons and any findings that would inform the scaling of inclusive insurance provision.