Philippine City Disaster Insurance Pool (PCDIP)

Transcription

1 Philippine City Disaster Insurance Pool (PCDIP) Strengthening the Enabling Environment for Disaster Risk Financing: Options for Enhancing Financial Resilience Benita Ainabe Financial Sector Specialist (Capital Markets) Asian Development Bank 26 September 2018

2 PCDIP project at a glance Strategy: aligns with The Philippines Department of Finance Disaster Risk Financing and Insurance (DRFI) Strategy, Philippine Development Plan (PDP) and s Philippines Country Partnership Strategy (CPS) Financial intermediation for a specific project: to provide seed capital to a pooled insurance company from which cities purchase parametric insurance Parametric insurance provides a far quicker payout than traditional indemnity insurance 10 cities were chosen to pilot this project and are expected to be the first batch of policyholders. 7 more added in consultations Photo credit: VisionFund International

3 Problem The Philippines is one of the world s most disaster-prone countries. Along the Pacific Ring of Fire Susceptibility to earthquakes, volcanic eruptions, tropical cyclones (typhoons), floods, landslides and droughts Significant losses and cost to the economy 1% of GDP, 4.7% in severe cases Source: Risk Management Solutions, Inc

4 Solution PCDIP is a sustainable solution that will complement existing DRFI instruments allowing the cities to become more financially prepared for disasters s support Regional technical assistance (TA): to assess DRF needs of pilot cities and pool design, $1 million Capacity building: data gathering, orientation and disaster risk insurance training sessions - up to 5 visits per city; Two national workshops for city representatives and national government agencies Proposed project loan to establish and capitalize PCDIP, $100 million Additional TA grant to recruit more cities and continue DRFI capacity building in existing cities, $3 million

5 National workshops National workshop,, January 2018 Representatives from the pilot cities and national government agencies National workshop,, June 2018

6 Outcome Fiscal resilience of the cities bolstered Financially sound investment in a risk transfer instrument with predictable payout expectations Allows cities to become self-sustaining in managing disaster risks and rehabilitating infrastructure and assets Quicker local economic recovery A solution to narrow the funding gap between available resources and post-disaster response costs for severe events Publication Stock No. ARM Cities enjoy the numerous benefits of a pool structure diversification, economies of scale, knowledge sharing

7 Similar successful global insurance pools Governments around the world use insurance as a key element of their DRF strategies (not all provide parametric insurance) PCDIP brings innovation to the global industry it will be the first cities insurance pool ARC. African Risk Capacity, founded in 2012, provides parametric insurance for droughts in African countries PCDIP. the Philippine City Disaster Insurance Pool. First ever cities insurance pool PCRIC. the Pacific Catastrophe Risk Insurance Company, established in 2016 provides parametric insurance to the Pacific Islands FONDEN. Fondo Nacional para el Desarrollo Nacional, a federal reserve fund established in the late 1990s, requires Mexican states to insure their public assets in order to access federal finance CCRIF. the Caribbean Catastrophe Risk Insurance Facility, established in 2007, provides parametric insurance to 17 Caribbean and Central American countries The Natural Disaster Fund (NDF) of New Zealand, administered by the Earthquake Commission (EQC) is used to settle earthquake insurance claims and is guaranteed by The Crown

8 *Indicative funding many options to consider Loan tranches Establish PCDIP Seed capital Premium buffer Investments e.g. bonds and equities Operating expenses First loss cover Disaster Severe National Government (NDRRMF/GAA or other) Cities Annual premiums Payout to cities within 3 weeks Cities choose frequency* *; depends on attachment point e.g. 1 in 10 *Ongoing discussions within PCDIP GSIS Reinsurers Annual premiums Payout to PCDIP to cover large losses **Beneficial to cities that experience frequent typhoons

9 Thank you