The World Bank has announced the renewal of a parametric insurance program that helps the Philippines better respond to losses from natural disasters, at an increased size of $390 million.
The renewal is almost double the size of the $206 million of insurance coverage secured under the 2017 policy, and provides 25 provinces in the country with protection against major typhoon and earthquake risks.
Coverage under the new policy, which was completed by almost double the amount of risk takers to the previously policy, became effective on December 19th, 2018.
Mara Warwick, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand, commented: “This initiative demonstrates the Philippines’ strong commitment to continue investing in innovative financial solutions that will mitigate the impacts of major earthquakes and extreme climate and weather-related events.
“The program complements the country’s overall strategy and efforts in ensuring resilience against natural disasters and climate change impacts.”
The program sees the World Bank enter into an agreement with private reinsurance companies to offer protection against natural disaster events for national government agencies and the 25 participating provinces.
The policy is structured using a parametric trigger, which means insurance pay-outs are made when pre-defined parametric triggers are met. The announcement explains that the parametric insurance coverage is provided by the Philippines Government Service Insurance System (GSIS). Parametric triggers enable rapid pay-out post-event, which is essential for more maturing parts of the world, such as parts of Asia.
At the same time, the World Bank has announced that it is working with the Philippines on the issuance of a sovereign catastrophe bond transaction to compliment its current insurance protection.
George Richardson, World Bank Director for Capital Markets, said: “Today’s announcement marks another milestone in our partnership with the Philippines, and in our joint pursuit of leveraging capital market instruments to prevent the human and financial tolls of disasters. We look forward to deepening this partnership as we work together to harness innovative financial solutions to boost the country’s resilience against unforeseen events.”
The country’s exposure to natural catastrophe events is extremely damaging to its economy and society, with the region expected to incur, on average, $3.5 billion in asset losses each year as a result of just typhoons and earthquakes.
