MANILA, Philippines - Due to the worsening natural catastrophes battering the Philippines, the private insurance industry, government and multilateral lending agencies are teaming up to create the country’s first-ever earthquake insurance pool.
This effort got a much-needed boost with a $225-million technical assistance (TA) special fund from the Asian Development Bank (ADB) in August.
The initial draft of the insurance pool is expected this December, and the first structured draft by the first semester of 2013. Implementation of the Public Private Earthquake Insurance Pool of the Philippines is initially seen in late 2014 or early 2015.
Madeleine Varkay, ADB principal public sector development specialist for Southeast Asia department, said the increasing number of disasters calls for an earlier implementation of the insurance pool.
“I am pushing for an earlier implementation,” Varkay said, expressing concern over the increased frequency of disasters in the Philippines.
The insurance pool will cover the middle class residential and medium-sized enterprise property owners.
The pool will strengthen the ability of the private insurance to underwrite new policies on catastrophe risk as well as enhance their capacity to proactively manage and transfer risk to international reinsurance companies.
It will offer options for insurers to expand available scope to cover private earthquake risk. Similar models are already being implemented in Taiwan, Turkey and Indonesia.
Varkay added that it would reduce the burden of the National Government to meet the urgent needs of the entire population during a catastrophe, and thus allow it to focus on the under-privileged segment of the population.
Leading the private sector is the Philippine Insurance and Re-insurers of the Philippines (PIRA), the trade organization of the country’s non-life insurance industry, and representatives of various international re-insurance firms.
The Department of Finance (DOF) and Insurance Commission (IC) are in the forefront of the efforts, assisted by the Bangko Sentral ng Pilipinas (BSP) and the National Economic and Development Authority (NEDA).
Ongoing is the property valuation survey, including model assets at risk, estimations of the scope of the market and related insurance and re-insurance premiums.
From these stages, the technical working group composed of the private and public sector representatives, will formulate the structure of the earthquake insurance pool.
The project is actually part of the bigger integrated disaster risk management that would result in innovative risk management tools in dealing with the increasing number, intensity and frequency of natural catastrophes. These include earthquakes, tsunami, tropical cyclones, floods and droughts.
What an integrated risk management program hopes to address is not only loss to life and property. The long-term as well as horizontal impact on the larger segment of the population and the economy in general.