The Philippines will be the beneficiary of a $600 million funding from the World Bank to help enhance its financial sector, with the ongoing development of its catastrophe insurance marketplace a key target.
For years now, the Philippines has been a priority country for rolling out efficient and effective catastrophe insurance products, from the smallest micro level, right up through commercial insurance and on to the catastrophe reinsurance needs of these programs and pilots.
Of course, the Philippines is also the beneficiary of a World Bank facilitated catastrophe bond, so is no stranger to the capital markets as a source of risk capital to back insurance products.
In addition, the country has dabbled with catastrophe risk pooling, large-scale sovereign reinsurance programs to protect against catastrophe risks, parametric risk transfer and a Philippines sovereign parametric disaster insurance facility that at the time had insurance-linked securities (ILS) fund backing.
These disparate efforts have not yet seen a catastrophe insurance marketplace develop though, where tiered levels of coverage, from the individual, through smallholders and SME’s, up to commercial risk transfer needs, as well as sovereign and government assets, are all available and backed by private market reinsurance capital.
Which ultimately has to be the goal, as the clear catastrophe, weather and climate risk exposure of the Philippines calls for a robust and well designed system that enables everyone from the poorest up to benefit from insurance based risk transfer.
The World Bank’s Board of Executive Directors has now approved $600 million of new financing to support the Philippine government’s efforts to boost the resiliency and sustainability of its financial sector and strengthen its economic recovery after the COVID-19 pandemic.
It focuses on three policy reform areas including “strengthening financial sector stability, integrity, and resilience; expanding financial inclusion for individuals and firms, especially micro, small, and medium enterprises (MSMEs); and catalyzing climate and disaster risk finance to help protect Filipino families from the impacts of climate change and natural disasters,” the World Bank said.
“Policy actions that strengthen the stability of the financial sector – including banks and insurance companies – will help Filipino families, businesses, and investors withstand financial shocks and enhance their resilience by ensuring that problems in these financial institutions are detected at an early stage without severe disruptions to the economy,” explained Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, Philippines and Thailand.
Developing the catastrophe insurance market in the Philippines is a key goal, Diop said, with a target of preventing people from falling into poverty following natural disasters.
He explained that, “Increased use of catastrophe insurance will allow the government to focus fiscal resources on supporting people who need them most, for example, through actions such as increasing post-disaster cash transfers and subsidizing insurance premiums for the most vulnerable populations.”
Public-private risk pooling facilities for catastrophe risk are in focus with this funding, as is the continued development of the Philippine Catastrophe Insurance Facility (PCIF).
In addition, we’re told there are discussions ongoing about a renewal of the Philippines World Bank supported catastrophe bond, which the country has benefited from through a payout for a major typhoon.
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