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Philippines gets P20.5 billion insurance coverage for government assets
MANILA, Philippines — The Philippines has successfully purchased a parametric insurance policy from the international reinsurance market which will provide a maximum coverage of P20.49 billion to protect the government’s assets against the impact of natural disasters, according to the Department of Finance (DOF).
In a report to Finance Secretary Carlos Dominguez, National Treasurer Rosalia de Leon said the government has placed its Parametric Insurance Policy, which will enable 25 catastrophe-vulnerable provinces and the national government to act faster and respond better in times of natural calamities.
The policy, which became effective yesterday, includes coverage for national and local government assets such as public elementary and high schools in the disaster-prone areas.
According to De Leon, the government was able to achieve a higher amount of coverage this year as more reinsurers provided support for the policy.
These include Nephila Capital Ltd., Munich Re Group, Swiss Re Group, AXA, Hannover Re, Hiscox Re, Allianz Re Switzerland, Tredje AP-Fonden (AP3) and SCOR SE.
“With the increased market participation, we were able to achieve a tighter multiple this year compared to last year’s transaction,” De Leon said in her report to Dominguez.
She said the premium payment for the program amounting to P2 billion was lodged under the National Disaster Risk Reduction and Management Fund for 2018.
De Leon said this development also augurs well for the planned indemnity and catastrophe bond (cat bond) issuance of the government.
Earlier, the DOF said it is exploring the possibility of sponsoring a cat bond issuance to help bridge the financing gap faced by the government in light of natural disasters.
Depending on the insurance coverage and its trigger, the Philippines as sponsor of the cat bonds will get paid the principal contributed by investors if a catastrophe occurs. But if there is no trigger, then investors would make a positive return on their investment in the bonds.
The Government Service Insurance System (GSIS) provides catastrophe risk insurance coverage to 25 disaster-prone provinces in the country under the government’s parametric insurance program.
Areas covered by the program are Albay, Aurora, Batanes, Cagayan, Camarines Norte, Camarines Sur, Catanduanes, Cebu, Davao del Sur, Davao Oriental, Dinagat Islands, Eastern Samar, Ilocos Norte, Ilocos Sur, Isabela, Laguna, Leyte, Northern Samar, Pampanga, Quezon, Rizal, Sorsogon, Surigao del Norte, Surigao del Sur and Zambales.
The World Bank, through its International Bank for Reconstruction and Development, acts as the intermediary to transfer or cede GSIS risks to the global reinsurance market, thus minimizing risks for the government.
Its Disaster Risk Financing and Insurance Program provided the preparation work for the program with financial support from United Kingdom’s Department for International Development.
In turn, the BTr is the designated policyholder, representing the 25 provinces and the national government.
Finance Assistant Secretary Paola Alvarez said this allows the program to have quick-disbursing payouts, which amounts will depend on the estimated loss triggers determined through the Philippines’ Catastrophic Risk Model, as well as damage reports from the ground.
“Since the Bureau of Treasury is the policyholder, the funds will be mobilized faster to the first responders, namely, the national government and the LGUs,” Alvarez said.
Source: https://www.philstar.com/business/2018/12/20/1878354/philippines-gets-p205-billion-insurance-coverage-government-assets#cbZuU6aVEREr1hXX.99