With assistance from the World Bank, the Philippines’ Department of Finance has announced the successful placement of a parametric insurance policy that provides up to US$386 million of cover to 25 high-risk provinces throughout the country’s eastern seaboard.
This appears to be a renewal of an arrangement made last year that provided reinsurance to back the parametric insurance scheme.
When it was first announced last August, the innovative scheme marked the first time the World Bank had executed a catastrophe risk transaction in the local currency.
If it does indeed turn out to be a renewal of last year’s agreement, then it will likely provide protection against losses from major typhoons and earthquakes; catastrophes from which the country is estimated to suffer $3.5 billion in asset losses each year.
In her report to Finance Secretary Carlos Dominguez III, National Treasurer Rosalia de Leon said that, in addition to the reinsurers in 2017, which included Nephila, Munich Re, Swiss Re, AXA and Hannover Re, a new set of reinsurers also provided support for the cover.
They are Hiscox Re, Allianz, AP3 (Tredje AP-fonden), and SCOR.
The program includes coverage for national and local government assets such as public elementary and high schools and will become effective starting December 19 at midnight, the Bureau of the Treasury (BTr) said.
“With the increased market participation, we were able to achieve a tighter multiple this year compared to last year’s transaction,” De Leon said in her report to Dominguez.
De Leon added that this positive development “augurs well for our forthcoming indemnity and catastrophe bond issue.”
The premium for the coverage is said to have been ₱2 billion, which converts to roughly US$37.8 million.
The World Bank’s Disaster Risk Financing and Insurance Program helped to prepare the transaction and parametric insurance facility, with financial support from the UK Department for International Development (DFID).
