The government of the Philippines is to try again to secure bids for an indemnity reinsurance program to cover around US $19.6 billion of its state-owned assets and infrastructure, having failed to secure the necessary market interest at the first attempt.
As we reported in early December, the Philippines government entered into a 1 trillion pesos insurance cover with its own Government Service Insurance System (GSIS) to protect against catastrophe related exposures and some other property risks for a range of government owned and funded assets and infrastructure.
The GSIS then put the reinsurance of the program out to tender, seeking bids for 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.
But the bidding was reported to have failed, as we explained near the end of last year, but now the government is going to try again as it still wants to secure this reinsurance protection as another layer within its disaster risk management plans.
The program, dubbed the National Indemnity Insurance Program, is designed to provide the government with insurance protection covering a range of state assets, such as schools, roads and bridges, across parts of its eastern seaboard, with the program underpinned by global reinsurance market support.
Roads and bridges would be covered across 25 named provinces of the Philippines, while schools would have been covered in 32 provinces, cities or municipalities.
The program would provide indemnity insurance protection against damages from fire, lightning and natural catastrophe events including typhoons, floods, earthquakes, volcanic eruptions and storm surges, while the claims paying ability would be funded by the reinsurance market.
Now, the Philippine Daily Inquirer reports that the one-year indemnity reinsurance will go back out to bid again, as the Philippines government looks to secure the necessary cover for the program.
National Treasurer Rosalia V. de Leon told the Inquirer that a timetable for the bidding was still being discussed, but that the aim is to secure the coverage for the indemnity reinsurance still using the same budget of around US $39.7 million (2 billion Pesos).
Alongside the Philippines other disaster insurance and reinsurance arrangements, including its first catastrophe bond arrangement, a $225 million transaction that provides the government with a source of tropical cyclone and earthquake insurance protection issued towards the end of last year, this indemnity program will add greater resilience to the government in case of disaster.
Being indemnity based, this new national catastrophe insurance program may not pay out as quickly as the parametric facility that the Philippines put in place a year ago or its new cat bond which has a modelled loss trigger, but it will be a valuable source of additional protection if the government can secure fresh interest and bids from reinsurance capital providers this second time of trying.