By Michael F. Rellosa Sustainability is an oft-discussed topic nowadays, and the recent catastrophic fires in Los Angeles emphasize the importance of the word for the insurance industry in the US and especially in the Philippines, where natural catastrophic perils are prone to happen. Sustainability refers to the ability to maintain something over time. In the context of insurance, it means ensuring that an insurance company can continue to operate effectively while providing coverage, even when faced with increasing risks, like the ongoing fires in places like Los Angeles. The press was rife with reports on the fact that many insurers pulled out of the area months or days before the fire occurred, leaving scores without any insurance protection. The problem was that scant attention was paid by the public and perhaps the government when this was happening. Previous fires and their increasing frequency forced Commercial insurers to pull out just when such coverage was needed. The wildfires in Los Angeles have posed significant challenges for both residents and insurance companies. These fires lead to large-scale damage to homes and properties, which means insurance companies must pay out more claims. If the frequency and severity of these fires increase due to climate change, insurers face greater risks and higher costs. When a lot of claims come in after disasters, insurance companies need enough money from premiums (the amounts people pay for insurance) to cover these costs. If they charge too little, they might not have enough money to pay for all the damage, which could put the company at risk. If insurers don't charge adequate premiums, they could go out of business. This means people wouldn't have insurance when they really need it, leaving them vulnerable to losing everything in a fire. Adequate premium rates can encourage homeowners to take steps to make their properties safer against fires. For example, if someone knows their premium is lower if they have fire-resistant materials or defensible space around their home, they may be more likely to invest in those improvements. By charging appropriate rates, insurers can build up a financial reserve. This reserve helps them prepare for future disasters, ensuring that they can support policyholders after events like wildfire. When insurers decide to leave a high-risk area due to frequent wildfires or disasters, the remaining companies might be overwhelmed with claims or may raise their rates significantly. This can make it difficult or too expensive for people to get insurance. It could lead to a situation where some homeowners cannot afford any insurance at all, leaving them unprotected. We are looking at this from a distance as these happened in America, but what if this scenario plays out in the Philippines, where circumstances are rife for such a scenario considering the fact that we are the country most prone to NatCat events such as typhoons, floods and earthquakes. Will we have enough resources to count on for recovery? We all know the answer to that, but what we can do is to spread the risk – allow the private sector to take on some of these risks and spread it further into the global reinsurance market. You may be aware that the local industry has been hard at work trying to provide avenues for such to occur but are hamstrung by our inability to correct our rates to reflect the true cost of risk, making it unacceptable to the reinsurance market. If only we can hurdle this roadblock then it will help pave the way for other mechanisms to play out. In summary, adequate insurance premium rates are essential for maintaining the sustainability of insurance companies, especially in areas prone to natural disasters like wildfires, hurricanes, tornadoes in the US and earthquakes, typhoons and floods in the Philippines. This approach ensures that insurers can remain in business, provide necessary coverage, and support communities effectively when they face crises. By considering the risks and charging appropriately, the insurance industry can better prepare for the future and help protect people and their properties. Source: manilatimes.net

If the state-mandated FAIR plan can’t cover all claims, Californians could receive insurance bills to cover the difference. A firefighter fights the flames from the Palisades Fire while it burns homes at Pacific Coast Highway amid a powerful windstorm in Malibu, Calif., on Jan. 8, 2025. Apu Gomes/Getty Images New rules enacted in September 2024 for the insurer of last resort in California—the Fair Access to Insurance Requirements (FAIR) plan—could leave homeowners insurance policyholders on the hook for fire losses in the Los Angeles area if totals exceed the plan’s ability to pay. “The bottom line is, the FAIR plan will have enough money to pay claims, but the way it will make sure it has enough money is by assessing all California policyholders, eventually,” Dave Jones, former commissioner of the California Department of Insurance, told host Siyamak Khorrami during a recent episode on EpochTV’s “ California Insider .” “If it gets there, that’s what will happen. People will get an additional bill ... which will come as a big surprise to Californians.” AccuWeather estimated the economic impact of the damage could top $150 billion . Insured losses could approach $20 billion or higher, according to analysts. “That’s an enormous loss for the insurance industry to sustain,” Jones said. He said the FAIR plan is an “involuntary association of insurance companies” that pool together to cover the properties deemed most at risk. The plan holds about $700 million in cash and $200 million in reserves, and carries $2.5 billion in reinsurance that will help cover losses, according to the plan’s most recent data . Total exposure exceeds $458 billion, a 61 percent spike from September 2023. The number of homes covered has jumped by 123 percent since 2020, and commercial policies skyrocketed by 161 percent over the same period. The 1,467 policies covered by the plan in the Pacific Palisades—which has some of the most expensive homes in the nation—equate to $5.89 billion in exposure, the fifth-largest area of risk in the state for the plan, according to its website . Nearly 24,000 acres have burned in the Palisades fire , which has destroyed or damaged at least 5,000 structures and is 19 percent contained, Cal Fire reported on Jan. 15. Average home prices are approximately $3.5 million in the city, with some of the coastal residences that burned worth tens of millions of dollars, according to online real estate firm Zillow . In Altadena, an area impacted by the Eaton fire —which has now burned more than 14,000 acres and destroyed or damaged approximately 7,000 structures—the plan covers just under 1,000 policies . The Eaton fire is approximately 35 percent contained, according to Cal Fire. Zillow calculates an average home value of about $1.3 million in the area. Jones said that if a substantial number of burned homes are covered by the FAIR plan, it could jeopardize its solvency. Rules proposed in July 2024 and issued  by the state’s Insurance Department in September 2024 changed how FAIR-plan losses would be covered, by spreading exposure to include all policyholders. In the event the plan is unable to pay claims, insurers are required to cover the losses at rates determined by their relative market share. The new guidelines allow insurers to recoup costs from policyholders through special assessments, if approved by the insurance commissioner. Such a procedure is needed to provide stability for the insurer of last resort, according to the state’s Insurance Department. “The FAIR Plan contains high-risk policies and maintaining its solvency is essential for paying future claims,” the department said in a statement. “While the FAIR Plan hasn’t had a solvency crisis in 30 years, we are taking no chances.” The changes were meant to improve the plan’s capacity to cover risky properties, the commissioner said in a statement. “Modernizing the FAIR Plan is a crucial step in our strategy to stabilize California’s insurance market,” California Insurance Commissioner Ricardo Lara said. “By strengthening the FAIR Plan while providing financial stability and solvency protections, we are creating long-term security for consumers, homeowners, and businesses across the state that is long overdue.” Similar regulations are in place in Florida and Louisiana in so-called shared market environments, where losses are spread to reduce exposure. With losses mounting due to the fires in Los Angeles County, rates will increase for Californians in the near future, according to Jones. “It’s going to be very expensive for Californians to access insurance going forward,” the former insurance commissioner said. Source: theepochtimes.com

The Indonesian archipelago will continue to have wet rainy season during 2025 as the impact of La Niña continues. The country can expect high intensity rainfall to occur until April and thereby increasing the risk of catastrophic events causing much disaster in the country. After enduring a prolonged dry season due to El Niño, a large part of Indonesia endured hydrometeorological disasters such as floods and landslides for most of last year, a trend likely to continue in the next few months, the country’s disaster agency has warned. Throughout 2024, the National Disaster Mitigation Agency (BNPB) recorded a total of 2,107 incidents of disasters that claimed at least 547 lives, displacing over 6.3mn others and destroying around 60,000 homes across the country, said the Post. The figure was less than half of the 5,400 incidents in 2023. But the decline was due to a new method used by the BNPB to classify an event as a disaster, which should now either result in at least one casualty, impact 50 people or damage five buildings, among other criteria. More than half of the 2024 disasters, around 1,088 incidents, were floods. Extreme weather events trailed as the second-most common occurrence at 455 incidents. While El Niño was the main regional factor that drove a high number of forest and land fires in 2023, it was La Niña’s turn last year, which brought wetter and colder winds to the archipelago, said BNPB spokesperson Abdul Muhari. “This caused rainfall to be higher than average, making floods and other extreme weather events the most frequent disasters last year,” Mr Muhari said in a press briefing on Tuesday. The report added that the Indonesian archipelago will continue to have wet rainy season during 2025 as the impact of La Niña continues. The country can expect high intensity rainfall to occur until April and thereby increasing the risk of catastrophic events causing much disaster in the country.     Hazards from hydrometeorological disasters were still expected to threaten the country in the coming months, Abdul said. The prediction was in line with a forecast from the Meteorology, Climatology and Geophysics Agency (BMKG) warning that extreme weather events could persist until April. “The intensity of rainfall will continue to increase until February. The BNPB is focusing on end-to-end integrated anticipatory measures,” the spokesperson said. Among other efforts, the disaster agency is launching cloud-seeding operations to induce rain before it arrives over heavily populated areas. The BNPB also plans to install new early warning equipment to detect the buildup of volcanic materials to anticipate lahar flows. The agency also aims to improve disaster preparedness at the grassroots level by disbursing funds, manpower and equipment for regional administrations and encouraging the establishment of community patrols to routinely check for signs of imminent disaster. Source: asiainsurancereview.com

Events and Seminars Dec 18, 2024 PIRA Board and Committee Christmas Party 2024 December 18, 2024 | The City Club, Makati Thank you to all PIRA Committee members; your dedication, hard work, and unwavering commitment... Dec 11, 2024 The Insurance School (Non-Life) of Japan Overseas Seminar We are pleased to invite you to the seminar organized by the General Insurance Association of Japan (GIAJ) , the General Insurance... Nov 7, 2024 Philippine Insurance Cup Golf Tournament 2024 Thank you to all who participated in this event. A shoutout to our sponsors who made this event possible. May the camaraderie of this... Oct 23, 2024 ICD-PIRA Roundtable Discussion on Corporate Governance for Insurance Companies As part of the 2024 Insurance Consciousness Month Celebration, the Institute of Corporate Directors (ICD) in collaboration with PIRA,... May 30, 2024 Philippine Insurance Summit 2024 May 30, 2024 | The New World Hotel, Makati Charting the Path Forward: Implications for the Future of Insurance in the Digital Age - A... Apr 15, 2024 ENABLING ECOSYSTEM-BASED ADAPTATION (EBA) AND NATURE BASED INSURANCE SOLUTIONS IN THE PHILIPPINES Dec 19, 2023 Combined Committee Christmas Party 2023 December 19, 2023 | The City Club, Makati Thank you to all PIRA Committee members; your commitment and efforts have made a significant... Dec 3, 2023 PIRA Road Safety Campaign Kickoff Takes Off with Positive Support from Insurance Commission Colleagues in the Industry, our Friends from the Motoring PRESS, Fellow stakeholders' dear friends, a pleasant morning to all. Thank you... 1 2 3 4 5

EVENTS AND SEMINARS Events and Seminars View Photos View

Industry News 19 hours ago 2025 Greetings from the AIC Chairman and AIC Secretary-General 21 hours ago First, they lost their home insurance. Then, L.A. fires consumed their homes Hopefully this situation does not arise in the Philippines especially for Catastrophic Perils. An estimated 7,000 structures have been... 5 days ago Invitation: Asian Banking & Finance and Insurance Asia Summit 2025 Unlock invaluable insights and network with industry peers by joining the Philippine Insurers and Reinsurers Association (PIRA). Mark... 6 days ago GENERAL INSURANCE IN JAPAN FACT BOOK 2023-2024 The General Insurance Association of Japan (GIAJ) has issued a report entitled "GENERAL INSURANCE IN JAPAN FACT BOOK 2023-2024". This... Jan 6 Insurance benefit packages for heart diseases ramped up by over 1600% The Philippine Health Insurance (PhilHealth) has expanded the coverage of its benefit packages for heart diseases by as much as 1,629%.... Jan 6 Tightens medical insurance fund through traceability technology China's National Healthcare Security Administration (NHSA) will soon roll out stricter regulation of medical insurance funds through a... 1 2 3 4 5 January 2025 (7) 7 posts December 2024 (16) 16 posts November 2024 (15) 15 posts October 2024 (14) 14 posts September 2024 (15) 15 posts August 2024 (30) 30 posts July 2024 (22) 22 posts June 2024 (26) 26 posts May 2024 (21) 21 posts April 2024 (20) 20 posts March 2024 (17) 17 posts February 2024 (11) 11 posts