Philippines fails to secure state asset & infrastructure reinsurance

The government of the Philippines has failed to secure the necessary bids for reinsurance support to cover roughly US $19.6 of state assets and infrastructure, according to a report.

As we reported in early December, the Philippines government had entered into a 1 trillion pesos insurance cover with its own Government Service Insurance System (GSIS) to cover in the main catastrophe related exposures and some other property risks for a range of government owned and funded assets.

The GSIS then put out to tender the reinsurance of the program, seeking a one-year source of indemnity to cover the subject assets and infrastructure, in what would have been a landmark deal in terms of size and coverage provided to the country.

The program, dubbed the National Indemnity Insurance Program, would have provided the government with insurance protection covering a range of state assets, including schools, roads and bridges, across parts of its eastern seaboard, backed by global reinsurance support.

Roads and bridges would have been covered across 25 named provinces of the Philippines, while schools would have been covered in 32 provinces, cities or municipalities.

The coverage would have insured against damages from fire, lightning and natural catastrophe events including typhoons, floods, earthquakes, volcanic eruptions and storm surges.

Now, the Philippines Inquirer has reported that the country’s National Treasurer Rosalia de Leon told the newspaper that the bidding for this program “failed”.

Reinsurers had been asked to provide their bids for the National Indemnity program by December 11th, which was already a one-week extension from the original timeline.

With the bid process reported to have failed, no further information has been forthcoming, the transaction may come back to market at a future date we’d imagine, perhaps after some additional structuring work has been undertaken to make it more appealing to global reinsurance capital providers, including insurance-linked securities (ILS) markets.

The Philippines Government’s GSIS has successfully secured a range of insurance and reinsurance covers in recent weeks, including Combined Risk and Catastrophe Excess of Loss Treaties for property and engineering, a marine hull reinsurance program, a reinsurance of the University, an all-risks policy for the country’s ports, airport liability coverage, among other programs.

It’s likely that the failure to secure the state asset indemnity coverage comes down to either the way its been structured or the budget being too low, as it seems unlikely reinsurance capital providers would not have the appetite to underwrite these risks.