World Bank assists on parametric Asian infrastructure disaster insurance pool

The World Bank is working alongside the governments of Singapore and Japan to establish a disaster insurance pool to cover infrastructure risks for Asian countries, with the facility set to provide coverage from later this year.

The infrastructure focused disaster insurance facility is expected to be managed by the Southeast Asia Disaster Risk Insurance Facility (SEADRIF), a parametric disaster insurance program established with the support of the government of Japan, the Asian Development Bank and the World Bank.

A report from the Nikkei newspaper in Japan states that the countries of Myanmar and Laos are set to be the first to buy coverage under the facility, paying around $20 million each for policies designed to cover public infrastructure such as bridges against damages due to natural disasters.

The disaster insurance coverage will be parametric in nature and triggers are expected to feature satellite imagery and data, to help derive when claims payouts are due after infrastructure has been damaged during specific catastrophe events.

The hope is that the use of satellite imagery and data means payouts will still be made even if communication networks within the affected country are damaged or unavailable.

The immediate focus will be on lower-income countries in Asia, but we understand the facility could expand to cover middle income Asian economies as well.

This will benefit the risk pool by adding diversification and scale, which will help in the provision of reinsurance capital to support its deliverables.

As well as the immediate coverage benefits for the governments in question, the hope is that having a source of disaster risk insurance for infrastructure will enable countries to rebuild more quickly and so reduce the hit to their economies from disasters.

This is also hoped to encourage foreign investors and companies operating in these countries, by providing greater certainty that disaster damages will be repaired swiftly, lowering the ultimate hit to their operations there.

With the World Bank’s involvement it will be interesting to see how this facility under SEADRIF scales up and how it sources its reinsurance capacity to support the infrastructure focused disaster risk pool.

SEADRIF itself was established to help bring parametric insurance solutions to countries in the Asia region for a range of use-cases, infrastructure protection being one of them.

It’s the latest in a range of disaster risk pooling facilities around the world that promise to be able to help the countries it covers benefit from modern risk transfer methods and economies of scale and diversification when accessing global reinsurance markets.