By Michael F. Rellosa
LOW pressure areas, or tropical depressions, in mid-April seem to be turning into the norm (we were just visited by Tropical Depression "Amang" a few days ago). If I remember right, state weather bureau Pagasa did mention that the "La Niña" has ended and we are now expecting the "El Niño" phenomenon characterized by the likelihood of increased above-normal rainfall, which in turn could lead to the destruction of crops and hamper production of other agricultural commodities, not to mention floods in major population centers. I have said it before and am saying it again — the Philippines is now considered the most vulnerable nation to catastrophic events and a significant way of protecting ourselves against the loss or damage that can occur due to such events is to insure ourselves.
Here comes the rub — the international reinsurance market has hardened to such an extent that local insurers are giving a long hard think about whether or not it would be economically feasible for them to continue to offer such coverages. In other words, at a time when the country needs access to catastrophic insurance covers, the supply may be dwindling.
The insuring public is now faced with a double whammy, a decrease in the supply of reinsurance protection for Cat Perils leading to a market driven price correction (read drastic increase) and/or the decrease in local direct insurers who may want to offer such a cover both of which are ill-timed and detrimental to our post-disaster recovery.
If you will remember, the non-life insurance industry came up with a study to review the prevailing Nat Cat rate for typhoons, floods and earthquakes, the combined rate of which is 0.15 percent. According to the studies made by both local and foreign experts, the technical (or risk rate) should be 0.4 percent. However, the industry recognized that a jump from the prevailing 0.15 percent to 0.4 percent would be too drastic and may shock the market. It was then decided to do it in smaller increments, i.e., 0.15 percent to 0.2 percent and ultimately 0.4 percent. The regulators (Insurance Commission) then vetted the suggested rate and issued a circular advising all concerned that the new minimum Cat Rate would be 0.2 percent beginning January 2023. However, there were questions from several quarters and the Insurance Commission rescinded its circular and placed the increases in abeyance. All these coincided with the change in leadership in the commission. We now have a new commissioner in the person of lawyer Reynaldo A. Regalado who hit the ground at a sprint. There are many important and existential issues besetting the non-life industry and its stakeholders, primary of which is the insuring public itself, so the new commissioner will have to prioritize. Mind you, among the other industries regulated by the commission are the life, pre-need, HMO, MBA — all of which have specific issues that need to be addressed. It is a good thing that the commission has an expert team of deputy commissioners, directors and staff whose valuable inputs and institutional memory can aptly and ably assist the new commissioner in his gargantuan task ahead. With the commissioner's background, experience, analytical and diplomatic skills, and more importantly, his willingness to dialogue, we are confident that the commission is in good hands and pressing issues will be given due course and resolved for the greater good.
This brings me back to the task at hand — to make the general populace aware of the benefits of insurance and how insurance really works. It is understandable that people distrust or even fear unfamiliar things and this is where we have to start. It took me several decades to understand the nuances of the industry and even today I still consider myself a student. Hopefully I can share this journey of learning with you through this column or some other opportunity.