Members of the Association of Southeast Asian Nations (ASEAN) have agreed to press ahead with plans for a disaster insurance fund after a meeting of their finance ministers last Friday in Bali. The ministers agreed that a regional disaster and catastrophe insurance facility is essential to deal with events such as earthquakes, typhoons and tsunamis in the region which is prone to major natural disasters.
The ministers discussed the challenges faced by their nations, which are still developing economically, their vulnerability to natural disasters and the potential economic losses which they could face. The ministers agreed to explore risk financing options and mechanisms which could be used as part of a regional framework for disaster risk management and recovery.
The ASEAN nations are Indonesia, Malaysia, Cambodia, Laos, Thailand, Vietnam, Singapore, Brunei, the Philippines and Myanmar. China has expressed an interest in being involved in any regional disaster insurance fund or facility and has been talking to ASEAN finance ministers.
There has been talk of creating an investment pool of bonds which would allow nations to withdraw funds after a disaster to allow them to speed economic recovery. There has also been talk among some nations in the region of the potential to issue a catastrophe bond, or multiple catastrophe bonds for certain peak perils in collaboration with the World Bank (an issuance in the MultiCat vein perhaps).
It’s possible that cat bonds could prove to be too expensive for these nations to issue alone, but with the cooperation of an organisation like the World Bank they could become a cost effective mechanism for disaster risk financing in the ASEAN nations.
The Indonesian finance minister stated after their recent meetings that a disaster insurance fund could be in place by the end of the year.