Turning experience into evidence

THE magnitude 7.8 Sarangani earthquake of June 8 reminded the country of a figure we have all learned to quote: roughly 98 percent of catastrophe losses in the Philippines are uninsured. Average annual disaster losses run in the order of $3.5 billion. Nonlife insurance penetration remains below 1 percent of gross domestic product.

Those numbers describe a structural condition rather than a verdict. We are one of the most hazard-exposed economies on earth, growing quickly, with an asset base expanding faster than the financial instruments designed to protect it. Every market at this stage of development has faced some version of the same challenge. The useful question is not who is responsible for the gap, but what closes it next.

A great deal has already been built. The Philippine Catastrophe Insurance Facility established a shared platform and a common standard for catastrophe exposure — a founding group of insurers took on the work of creating something that did not previously exist. The Philippine Agricultural Co-Insurance Pool is advancing with the Department of Agriculture, the Philippine Crop Insurance Corp. and the World Bank, and has drawn serious international reinsurance interest. The country’s sovereign catastrophe bond demonstrated that parametric transfer works here, paying out after Typhoon Odette. The Insurance Commission has steadily modernized the regulatory framework, from admitted-asset treatment to the reporting and sustainability standards now coming into force. None of this was inevitable.

The next stage of that work is quieter, and in my view, it is where the greatest leverage now lies: building the evidence base that lets Philippine risk be priced from Philippine experience.

Consider three current files. Compulsory personal accident cover for motorcycle-taxi riders concerns a genuinely new risk class — one with almost no historical loss record anywhere in the world. The industry produced an interim premium built on careful actuarial derivation, which is exactly what prudence requires when experience is thin. As ride and incident data accumulate through the platforms and the transport authorities, that figure can be refined toward something observed rather than inferred. That refinement is the point of an interim rate.

Mandatory Domestic Maritime Crew and Passenger Personal Accident cover raises the same question in a different setting. The industry and the commission are working through the technical basis for pricing a segment where credible loss experience is still being assembled. That is a constructive process, and both sides want the same outcome: a rate that is fair to the passenger and the seafarer, and one that the market can actually pay on when a claim arrives.

In agriculture, our modeling partners bring global capability to a pool that is being designed here. That is a sensible way to start. Over time, as claims and yield data from Philippine farms accumulate in a usable form, domestic experience will increasingly carry the pricing.

The common thread is that evidence makes everything else possible. A rate grounded in data is a promise that can be kept. Evidence is also what makes affordability tractable — once the true cost of a risk is known, support can be targeted precisely, whether through pooling, product design, premium assistance or incentives for risk reduction. Without it, we are left arguing about numbers instead of about policy.

This is why the industry’s actuarial study and data repository for fire, motor and surety matters more than its unglamorous name suggests. Its value depends on three things: consistent definitions and formats, so that scale produces clarity rather than noise; broad contribution, so that the picture reflects the market rather than a corner of it; and rigorous confidentiality, which the rating-organization mandate exists precisely to protect. No company’s competitive position should be the price of participation, and none needs to be.

We would also welcome deeper partnership beyond our own sector. Ride-hailing platforms, transport regulators, port and shipping authorities and disaster agencies hold operational records that, combined with the claims experience held by insurers, would give the country a far sharper picture of what is actually at risk and what actually fails. Held separately, these are fragments. Assembled, they are a national resilience asset.

Capital follows conviction, and conviction follows evidence. Every instrument we hope to see — wider facility participation, a permanent parametric framework, catastrophe reserving, insurance on public assets — rests on the ability to say what risk costs and to show the working.

The numbers are talking. Our task, together, is to collect them well.

Source:

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