The government of the Philippines is seeking reinsurance protection for a new National Indemnity Insurance Program, designed to provide PhP 1 trillion (roughly USD 19.6 billion) of cover for certain assets in 25 provinces in the Eastern Seaboard.
According to an announcement, a memorandum of understanding (MoU) between the Philippines government and its own Government Service Insurance System (GSIS) has been signed, and the GSIS has now put out to tender the reinsurance of the National Indemnity Insurance Program.
Specifically, the GSIS is seeking the procurement of a one-year (December 19th 2019 – December 19th 2020) source of indemnity insurance with reinsurance support from the international markets via the services of a reinsurance brokerage.
Documents reveal that National Government schools, roads and bridges within the 25 named provinces are to be insured against fire, lightning and natural catastrophes such as typhoons, flood, earthquakes, volcanic eruptions, and storm surges.
The bidder, or broker, must provide a number of services such as cat modelling, product structuring, policy wording drafting, and the 100% execution of the reinsurance placement.
Looking at the execution requirements in greater detail, and the GSIS notes that the execution shall be for a reinsurance panel with a number of minimum requirements, such as A.M. Best or S&P ratings of at least A- and a stable outlook, has written at least USD 1 billion in premiums in the last year, and has a liquid asset to total liabilities of at least 50%.
However, the bidder is advised by the GSIS that The National Reinsurance Corporation of the Philippines (Nat Re) should be part of the reinsurance panel and that it shall be exempt from all of the above minimum requirements.
The new National Indemnity Insurance Program comes soon after the Republic of the Philippines secured financial protection against earthquakes and cyclones via tranches of catastrophe bond notes, which were issued under the World Bank’s International Bank for Reconstruction and Development (IBRD) program, providing $225 million of total coverage for three years.
The region is clearly serious about protecting itself against the financial and societal impacts of natural catastrophe events. The Philippines is considered to be among the most disaster-prone countries in the world, and with insurance penetration low in the country for a number of reasons, national programs and catastrophe bond transactions are one way for the government to secure financing for recovery post-event.
The latest program is structured as an indemnity one, which means that any payout would take longer than both the recent catastrophe bond and also the $390 million parametric facility that it has in place.
According to documents released by the GSIS, the Philippines has a budget of approximately USD 39.5 million for the premiums to back the reinsurance for its new National Indemnity Insurance Program.
