PIRA Executive Director Mitch Rellosa representing the private sector attended the DENR Forum on the Blue Economy at The Novotel Manila Araneta City, on April 26, 2024. PIRA is on the panel of speakers. DENR Secretary Yulo-Loyzaga

By Herminia S. Jacinto The insurance industry is at the top among the business organizations that use much paper. From the proposal to offer the coverage, the issuance of the policy and forms of acknowledgment up to the payment of claims — paper is the main ingredient. Then came computerization, a welcome solution to the paper-intensive insurance business. Companies built their own computer systems to mechanize the issuance of insurance contracts, which come in several pages, including the additional pages called endorsements. The insurance policies are personalized with the companies' logo and in several colors, too! Copies can be reproduced as needed and sent electronically as well. A lot of efficiency was therefore achieved by computerization. We thought that was already an achievement until more technical and sophisticated systems were developed. The need to catch up and be aligned with the present way of doing business has become urgent. Just push back to five years ago, say, before the pandemic. The change in the accounting system under the IFRS 17 standard has not yet been discussed. The existing system was doing its job perfectly well. Fast forward to 2024. The financial statements of insurance companies will now be prepared in the IFRS 17 format to serve as preparation for or comparison with the 2025 financial statements. The industry associations, both for life and non-life, are doing a fantastic job of getting the new accounting and reporting system in place and being implemented as required in 2025. Consultants like the auditing and actuarial firms have teamed up to provide the much needed assistance for its implementation. Are we ready then to switch to the new accounting system? I believe the companies are ready. But not all employees are. Understandably, training can only be done for a group of employees. Others have their own assignments to do in the everyday operations of their companies. But it is imperative that they should also be trained to use the new system. Companies see that need, but how to do it is still something to figure out at this time. Should they continue to hire consultants to train everybody? That may be expensive. Should the first trainees handle the training? They may not have the skills to pass on the knowledge effectively. But there should be no compromises with regard to this project — to upskill all the employees in the organization. We go back now to the issue that has been written about in past columns here — the importance of training employees. In the past, it was enough to take courses in the various aspects of the insurance business. As the employees were trained about policy conditions, they learned a lot, too, about important matters like insurance law. The Insurance Code became their second Bible! The so-called underwriting experts were happy they had issued a policy contract with all the provisions beneficial to the companies and the insureds. Now, they also have to understand how those policies were taken up in the books and how the resulting losses will affect their future decisions. There is so much more to learn now. Corporate governance, sustainability, climate change, and the Anti-Money Laundering Law are just some non-insurance topics one should learn now. Training should be a major concern and activity for which the companies should plan and provide a budget. Training should be for everybody. Easier said than done. But it can be done. One of the reasons why companies hesitate to train everybody is the fast turnover. We have observed this in the last few years, especially after the pandemic. Companies should revisit their attendance styles. Many employees found the work-from-home mode, even for 2 or 3 days a week only, a more convenient way of going to the office. They move from one company to the other, which can satisfy their personal needs. We should continue to look for ways to keep our well-trained employees. Source: manilatimes.net

It's that time of year again! We're thrilled to announce the launch of nominations for the 28th Asia Insurance Industry Awards (AIIA) 2024. Nominations for the prestigious 28th Asia Insurance Industry Awards (AIIA) 2024 are now open. As stalwarts in the industry, we have witnessed remarkable growth and resilience over the past 28 years. The AIIA trophy remains the pinnacle of achievement, symbolizing excellence and dedication. This year, we introduce a new category to recognize AI initiatives driving industry innovation. So, let us showcase our industry's best together. Let us raise the bar together. We eagerly anticipate your submissions. Submit your nominations, whether self-nominated or third-party and join us in celebrating the industry's finest.

A new study Global prediction of extreme floods in ungauged watersheds published in a recent issue of scientific journal Nature says AI and machine learning technologies have significantly improved global flood forecasting, particularly in regions where flood-related data is scare. According to the study the use of AI-based technologies in riverine flood forecasting can be a significant change, extending the reliability of global warnings from zero to five days on average. This advancement can help save lives by providing real-time river forecasts up to seven days in advance, especially in regions of Africa and Asia. The study led by University of California assistant professor (land, air, and water resources) Grey Nearing, however, said, “Further work is needed to expand coverage to more locations and for other types of flooding, underscoring the importance of continued collaboration between tech companies, academic institutions, and governments.” The study revealed that: $50bn are the annual economic damages worldwide caused by floods, the most common natural disaster Over 1.5bn people or 19% of the world’s population, are exposed to substantial risks from severe flood events The rate of flood related disasters has more than doubled since the year 2000, partly due to climate change From zero to five days is how much reliable river flood forecasts have been extended using AI-based technologies\ While the machine learning models have shown significant improvement in forecasting, the system still relies heavily on publicly available weather data and physical watershed information. This could pose a challenge in areas that lack necessary infrastructure for data collection, which often correlates with lower GDP and increased vulnerability to flood risks. The models also need further development to cover other types of flood-related events, such as flash floods and urban floods. Accurate and timely warnings are critical for mitigating flood risks, but hydrological simulation models typically must be calibrated to long data records in each watershed. Source: asiainsurancereview.com

In a digitalised global economy, insurers contribute significantly when protecting businesses against the cyber risks they face. The insurers through their expertise, strong collaborative networks and clear focus on data analytics, risk quantification and accumulation modelling, have a deep understanding of the threat landscape and a discernment of the limits of insurability. A new report Cyber Insurance: Risks and Trends 2024 published by Munich Re in April 2024 said the cyber insurance market has further matured and looking to the future, the focus remains to meet increasing demand and manage dynamic risk exposures, while focussing on the sustainable insurability of cyber risks and market functionality. Munich Re CEO reinsurance Thomas Blunck said, “There is still too high a proportion of uninsured cyber risks. According to our current global cyber survey, 87% of managers surveyed state that their company is not adequately protected against cyber risks. Risk awareness and demand will continue to rise, also against the backdrop of a rapidly growing threat from aggressive cyber criminals, recent technologies and dependencies, as well as geopolitical crises.” Cyber risk continues to increase, driven by rapid technological advances such as (generative) AI or cloud technology. Global industries are increasingly dependent on IT, IoT, operational technology and digital services, such as cloud computing, each of which represent a critical part of the supply chain for many risk owners. The advancing sophistication of cyber criminals and the tense geopolitical situation also shape the cyber threat landscape and pose a threat to global societies and democracies. The report said even though today’s value chains are largely dependent on digital assets, the level of protection appears to remain inadequate. According to the Munich Re Cyber Risk and Insurance Survey, 87% of global decision makers say their company is currently not adequately protected against cyber attacks. Cyber insurance penetration and associated resilience need to be further increased. Source: asiainsurancereview.com

The Insurance Commission (IC) has announced that the net income of the insurance industry, comprising life and non-life insurance companies and mutual benefit associations (MBAs), reached PHP48.46bn ($848m) in 2023, 3.8% higher than the PHP46.69bn chalked up in 2022. In a statement, the IC attributed the slight increase in net income to non-life insurance companies which recorded PHP9.11bn in net income, up by 30.1% from PHP7.00bn in 2022. On the other hand, the net income of life insurance companies dipped by 0.72% year on year to PHP33.63bn. The net income of MBAs in 2023 fell by 1.55% year on year to PHP5.73bn in 2023. Premiums Meanwhile, the IC reported that the total premium collection by the insurance industry last year grew by 2.36% to PHP389.61bn, with all three categories — life and non-life and MBA— reporting increases. Premiums from traditional life insurance products collected increased by 11.52% to PHP105.19bn, and those from variable life insurance products decreased by 4.84% to PHP204.80bn, it added. Non-life insurance companies and MBAs posted an increase in their net premiums written by 12.9% to PHP64.24bn and by 8.29% to PHP15.38 bn, respectively. Meanwhile, benefit payments by life insurance companies and MBAs declined by 3.8% and 25.41%, respectively, while non-life insurance companies’ benefit payouts rose by 18.85% to reach PHP26.10bn. Insurance penetration fell from 1.73% in 2022 to 1.60% in 2023. The insurance industry’s total assets posted growth of 8.02% to PHP2.31tn as of 31 December 2023 from PHP2.14tn 12 months previously. Source: asiainsurancereview.com

Property insurers operating in Taiwan are projected to maintain profitability in the aftermath of a recent 7.2 magnitude earthquake that struck the country's eastern coast, according to data and analytics firm GlobalData. The earthquake, which inflicted significant damage – particularly in Hualien, where collapsed buildings and infrastructure disruptions occurred – presents notable challenges to the insurance industry. Nonetheless, analysts anticipate that government-supported initiatives will help alleviate losses. How would Taiwan insurers sustain profitability following the earthquake? GlobalData said insurers may need to reassess their risk exposure and adjust premiums to sustain profitability in the wake of this seismic event. Aarti Sharma, insurance analyst at GlobalData, pointed out that Taiwan is situated in one of the world's three major seismic regions, making it vulnerable to natural disasters, particularly earthquakes. “Being located in one of the three major seismic regions globally, Taiwan is prone to natural calamities, especially earthquakes. As a result, the penetration of earthquake insurance is moderately high in Taiwan, and the current earthquake is expected to result in high claims for local insurers and reinsurers,” she said. According to data from GlobalData's Global Insurance Database, property insurance claims are estimated to represent an 11.6% share of total general insurance claims in 2024, amounting to TWD14.1 billion ($0.5 billion). However, the actual claims for 2024 may exceed this projection once the full impact of the earthquake is assessed. Despite these potential losses, the overall profitability of Taiwan's general insurance industry is not anticipated to suffer significantly. The average loss ratio for property insurance has remained relatively low at 31.5% during the period from 2019 to 2023. Furthermore, the majority of losses will be absorbed by the Taiwan Residential Earthquake Insurance Fund (TREIF), which was established by the government in 1999 to bolster the country's earthquake insurance framework. Taiwan property insurance forecasts Sharma forecasts that the property insurance sector will experience growth, with gross written premiums (GWP) increasing from TWD51.8 billion ($1.7 billion) in 2024 to TWD66.8 billion ($2.2 billion) by 2028, reflecting a compound annual growth rate (CAGR) of 6.5% over the period from 2024 to 2028. The significant impact of the recent earthquake on residential and commercial properties is expected to drive demand for fire and natural hazard policies that include coverage for earthquakes in 2024 and 2025. Fire and natural hazard policies are projected to account for an 80.4% share of total property insurance gross written premiums (GWP) in 2024. Meanwhile, a real estate firm brought to light the fact that a significant portion of Taiwan's stock lacks comprehensive earthquake insurance. Source: insurancebusinessmag.com

Join us for an insightful discussion on building resilience in the face of El Niño's challenges through "Sa Init May Pag-asang Makabangon: Business Resilience Amidst El Niño," on April 25, Thursday, from 1-4pm. Hear valuable insights from experts, one of whom is Mr. Alexander "Sandy" Reyes, PIRA Representative, to gain an understanding of the current situation of El Niño in the Philippines and learn how to mitigate its potential impacts toward MSMEs.

By Michael F. Rellosa The Philippines is situated on the western fringes of the Pacific Ocean and is therefore subject to the twin phenomenon of El Niño followed by the La Niña events, together known as the El Niño Southern Oscillation Cycle (ENSO). El Niño results from the warming of the central and eastern Pacific regions, affecting air and sea currents. This, in turn, causes dry spells, droughts, and other adverse environmental effects in the country. Conversely, La Niña means the cooling of the same regions of the Pacific Ocean, resulting in frequent and intense typhoons, subjecting the Philippines to floods, landslides and other detrimental effects. We currently find ourselves at the tail end of a particularly bad El Niño where, as of the end of March 2024, Pagasa reports that 37 provinces are experiencing drought conditions characterized by three consecutive months of below-normal rainfall with a more than 60 percent reduction from the norm. There are also 22 provinces that are experiencing dry spells where there have been three months of below-average rainfall with a 21-60 percent reduction from the norm. Finally, there are 12 provinces with a dry condition, meaning they have had at least two consecutive months of below-normal rainfall. Currently, there are about 29,400 affected farmers, with 18,000 from Region 6, 6,300 from Region 2, 2,600 from Region 4B, 2,000 from Region 1, 400 from Region 4A, and 22 from Region 9. This translates to 32,200 hectares of croplands destroyed or 44,800 metric tons lost. The majority of these are rice (64 percent), followed by corn (18 percent) and other high-value crops, i.e., vegetables, coffee and cacao, among others (18 percent). In monetary terms, this is a loss of $31.2 million or P1.76 billion. It's huge, especially if you factor in our food security and the fact that we are actually net importers of our grains and other foodstuffs. The Department of Agriculture has estimated that the ongoing El Niño will persist through May. It is then expected to gradually transition through June of this year, where an ENSO-neutral period is expected to kick in (neither El Niño nor La Niña will be felt during this transition). Pagasa estimates a shift to La Niña with a high percentage of probability, and as you know, this brings with it frequent and stronger typhoons. How are we supposed to handle such gigantic risks that we perennially face? A risk manager would immediately offer a suite of risk management methods such as the planting of submergence-tolerant rice varieties like NSIC Rc194 (Submarino) or PSB Rc68 (Sacobia) in areas prone to floods; the adjustment of the time of planting where flowering, grain filling and harvesting do not coincide with times of heavy rainfall or winds; the proactive repair of dikes, drainage and irrigation canals; the draining of excess water from rice fields before and after heavy rains; the usage of windbreaker structures to protect crops from strong winds, i.e., rows of tall, sturdy plants along bunds; the use of mechanical driers; the practice of rainwater harvesting using small farm reservoirs; and last but not least, the adoption of risk transfer mechanisms, otherwise known as insurance. There are insurance products, both traditional and novel (parametric), that cover against excess rainfall and/or drought, both offered by the state-owned Philippine Crop Insurance Corp. and increasingly by private sector insurers who are currently getting their feet wet in this area and gaining experience in the underwriting and claims servicing of this sector. Thus far, we have talked about crops and wet conditions; what about the dry conditions El Niño brings? We battle rising temperatures and the adverse effects that they bring through another suite of risk management efforts that include but are not limited to structural heat insulation, making homes and workplaces impervious to heat, using natural cooling methods such as the incorporation of plants to provide shade, reduce heat absorption and improve air quality. Achieving proper ventilation via traditional architectural techniques such as elevated structures, high ceilings and wide windows with deep eaves, all of which contribute to a cooler, more comfortable and healthier condition for the building occupants. Again, risk transfer or insurance for heat-induced risks such as sickness as well as fires that happen frequently during the dry season. Water shortages also call for its own suite of risk management tools, such as rainwater harvesting, water-saving techniques and alternative water sources. Relatedly, it is important to prevent fires and ensure safety calls for using fire-resistant landscaping, safe cooking practices and emergency preparedness. Meanwhile, bracing for typhoons and extreme weather means the use of reinforcing homes or retrofitting homes to better withstand the effects of a typhoon and the incorporation of natural barriers. Finally, insurance comes in as a final tool to round off the various tools already mentioned. When all else fails, you can be certain that you can always rebuild your home or replant your crops in the event of any peril that you may be exposed to. The idea of being aware of the risks and knowing that there are many ways of handling such risks, with insurance as the anchor, is the way to go for us here in the Philippines, which is now known as the most vulnerable country in the world to natural catastrophic (Nat Cat) events. Source: manilatimes.net