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Natural catastrophe insurance and why we need it

By Michael F. Rellosa

IF the topic of climate change is du jour, so will the topic of Nat Cat coverage be, and with it the slew of issues that accompany Nat Cat insurance, especially in the Philippines. My previous columns touched on the need to adjust the rates of Nat Cat protection to make it sustainable in the face of the ever-hardening reinsurance market and the fact that the local rates have not been reviewed in two decades. What is the point of having a solution that will not be sustainable and will be pulled out after a streak of losses? We also talked about the launch of initiatives that will provide more local Nat Cat capacity and maximize the efficiencies of a pooling arrangement to obtain better terms from the international reinsurance market. Another topic talked about is the launching of a new product especially designed for the underserved portion of the populace who are disproportionately exposed to Nat Cat events and are prey to their dire results.

I am not exactly sure what is keeping us from finalizing these initiatives as well as reviewing the current pricing of Nat Cat coverage. There are some intricacies that need the regulators' nod as the initial steps depend on it; hopefully they will get to see the forest for what it is and not just the trees. In the end, it is the insuring public that will benefit from having access to the appropriate coverage provided by a sustainable industry that will be there when the rubber hits the road.

What baffles me no end, is that the General Insurance Stakeholders not only are aware of the situation but do understand how it came about and have a rather good idea of the solution. What is then preventing us to band together, put our cards on the table and agree on the best way forward for our good and the good of the insuring public? To go the usual way of undercutting each other just to get the business is just no longer feasible and will be downright foolhardy.

The other players such as the multilateral aid organizations such as the World bank and Asian Development bank; National AID Organizations such as USAID, GIZ, the Academe, NGO’s and even civil society, the various regulators prime of which is the Insurance Commission are all busy with their pet projects, but what if we all sat down agreed on the low hanging fruit and agree to work on each in succession guaranteeing greater success for each of the chosen projects. The past years have seen fits and starts with none of the projects having been fully accomplished despite the enormous amount of time, effort and resources poured into getting these various projects off the ground.

Let us not wait for another catastrophe a typhoon, the floods it causes or a major earthquake to spur us on to action and results. Let statistics, history and science move us to completing the initiatives already set into motion so that when such a catastrophe occurs, we are ready for it and the vulnerable will have the means albeit limited to pick up the pieces of their lives and start over.

On a related note, I would want to plug a planned workshop to be held in Manila first week of August collaborated on by the Insurance Development Forum; the Micro-insurance Network; the InsuResilience Global Partnership, The Insurance and Risk Facility of the UNDP, The Insurance Institute for Asia and the Pacific as well as the Philippine Insurers and Reinsurers Association. This forceful coalition brings together all the important stakeholders to discuss and allow for a coordinated and comprehensive approach to address the issues at hand. These are being held around the world in chosen countries one of which is the Philippines on account of the vulnerabilities we have to Nat Cat events and the sizeable protection gap that has been identified. Hopefully, the sheer number of individuals and groups working towards providing Insurance protection to the least of our compatriots would make us see the value of each of these individual initiatives and convince us to hastily work towards its fruition.


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