Philippines builds insurance buffer as climate shocks intensify across Asia

Southeast Asia stays underinsured, leaning on savings and state aid

The Philippines is increasing its insurance buffer against climate-related shocks, with higher penetration, rising property premiums, and a broader mix of catastrophe risk solutions emerging as severe weather events affect Asia.

Insurance penetration trends amid regional catastrophe activity

According to Aon’s report, cited by Manila Bulletin, insurance penetration in the Philippines reached 1.85% in the third quarter of 2025 (Q3 2025), up from 1.74% in the same period of 2024. The metric, calculated as total insurance premiums as a share of gross domestic product, shows a modest increase in formal risk transfer in the economy. Non-life business accounted for 1.1 percentage points of this penetration, indicating higher take-up of cover for property, motor, and catastrophe exposures. According to Aon, non-life premiums in the Philippines rose 13% year over year to more than US$1 billion in the third quarter of 2025, compared with US$906.5 million a year earlier.

The shift in coverage occurred alongside a series of storms across Southeast Asia. Between June and August 2025, Tropical Storm Crising and Typhoons Betty, Isang, and Emong affected the Philippines, Vietnam, Thailand, Laos, and Myanmar. The events caused more than 150 deaths, damaged over 200,000 homes, and destroyed around 480,000 acres of crops, with estimated economic losses of up to US$3 billion. From late September through November, Typhoons Opong, Nando, Paolo, Tino, and Uwan again struck the Philippines, Vietnam, and Thailand, leading to more than 500 additional fatalities and losses exceeding US$5 billion.

Globally, Aon estimated economic losses of US$260 billion in 2025, about 23% below the 21st-century average and the lowest annual figure since 2015. Insured losses reached US$127 billion, around 27% above the long-term average, suggesting that a larger share of aggregate losses was covered by insurance and contributing to a global protection gap that narrowed to about 51%. More than half of global economic losses were recorded in the US, followed by Asia-Pacific, then Europe, the Middle East, and Africa, and the rest of the Americas.

Protection gap in Southeast Asia remains high

Despite increased insurance penetration, Aon’s analysis indicates that Southeast Asia remains significantly underinsured relative to its natural catastrophe exposure. The region continues to rely heavily on self-funding and public resources for post-disaster recovery. Since 2000, only about 12% of economic losses from floods and tropical cyclones in Southeast Asia have been insured, leaving an estimated 88% protection gap. This reflects uninsured or underinsured exposures across households, commercial property, infrastructure, and public assets.

The Philippines illustrates these conditions. The country is exposed to frequent typhoons, floods, landslides, and storm surges, and recent years have seen shorter intervals between major events. On Nov. 9, 2025, super-typhoon Fung-Wong made landfall in the Philippines, bringing flash floods, storm surges, landslides, and strong winds only days after Typhoon Tino. The Department of Agriculture estimated that Fung-Wong caused around PHP968 million (US$16.8 million) in damage to the agriculture sector. National meteorological records indicate that the number of super-typhoons affecting the country has more than doubled over the past two decades, while World Bank data puts average storm-related damage at about US$3.5 billion a year.

Property insurance outlook within general insurance growth

Data and analytics firm GlobalData expects recurring natural catastrophes to influence medium-term demand for property insurance in the Philippines and to shape risk appetite and strategy for insurers, reinsurers, and policymakers. Property insurance is projected to remain a major class within the Philippine general insurance market. GlobalData forecasts that property claims will account for 22.7% of total general insurance claims in 2026, reaching PHP6.4 billion (US$110.9 million). The firm notes that actual claims could exceed projections as loss experience from super-typhoon Fung-Wong and other 2025 events becomes fully known.

On the premium side, GlobalData’s Global Insurance Database projects that property gross written premium will grow at a compound annual rate of 11.5% between 2026 and 2030, rising from PHP66.9 billion (US$1.2 billion) in 2026 to PHP103.3 billion (US$1.8 billion) by 2030. “The global climate crisis is contributing to the increased intensity and frequency of tropical storms and typhoons. Despite rising catastrophe related losses, the Philippine property insurance market is expected to expand steadily. It is expected to remain profitable, with the loss ratio projected to remain well below 50% during the 2026–30 period,” said Manogna Vangari, insurance analyst at GlobalData. At the broader market level, GlobalData projects that Philippine general insurance gross written premium will rise from PHP153.8 billion (US$2.7 billion) in 2025 to PHP229.7 billion (US$3.9 billion) by 2029, equivalent to a 10.6% compound annual growth rate. Property insurance is expected to represent nearly 40% of general insurance premiums in 2025.

Role of infrastructure, mortgages, and microinsurance in distribution

Infrastructure projects and housing finance are acting as channels for additional insurance penetration. In March 2025, a PHP149.5 million (US$2.6 million) flood-control project in Liloan, Cebu, was approved with a requirement for contractors to obtain all-risk insurance, incorporating risk-transfer conditions into climate-exposed public works. Mortgage-related covers are also contributing to property insurance use. “Private mortgage protection is accelerating in the island nation. In August 2025, Pag-IBIG Fund launched housing loan insurance claims for typhoon-damaged homes in Pangasinan, ensuring a five-day processing window and allowing claims without a formal calamity declaration. This operational model reduces recovery delays and illustrates how property insurance can cushion household balance sheets following severe weather events, strengthening consumer confidence in the industry,” Vangari said.

Microinsurance is being used to provide catastrophe cover to lower-income and underserved groups. Domestic providers offer low-cost products covering perils such as fire, typhoon, flood, and earthquake, typically with benefits of up to PHP20,000 (US$346.68) for annual premiums starting at around PHP250 (US$4.33). These policies are aimed at segments that often face high exposure to severe weather and have limited financial buffers.

Parametric and agricultural solutions in disaster risk management

At the sovereign level, the Philippines has put in place catastrophe risk-transfer arrangements with World Bank support, including parametric and catastrophe insurance mechanisms intended to provide quicker post-disaster funding. Under parametric covers, payouts are triggered when agreed thresholds – such as wind speed or rainfall levels – are reached, rather than after traditional claims adjustment. Despite these measures, the World Risk Index estimates the country’s catastrophe protection gap at about 98%, compared with a global average of 58%, indicating extensive uninsured and underinsured exposure across sectors.

In agriculture, the Philippine Crop Insurance Corporation is working with local governments to extend crop cover and accelerate claims processing. The institution is using satellite mapping tools to support faster assessment and settlement for farmers affected by weather-related losses. For insurers and reinsurers across Asia, developments in the Philippines provide a case study of how a highly exposed market is using a combination of traditional indemnity policies, microinsurance, mortgage-linked products, and parametric solutions to address climate-related risk and the long-standing catastrophe protection gap.

Source: www.insurancebusinessmag.com