Executive Summary. CRI Challenges

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2 Executive Summary RFPI Asia III stands for Regulatory Framework Promotion of Pro-Poor Insurance Markets in Asia Phase 3. Its goal is - The strategic and technical prerequisites of high-quality climate risk insurance for extremely poor, poor and at-risk people have been created. The regional Program will be implemented in three partner countries namely - Indonesia, the Philippines, and Vietnam and will contribute to their national implementation of the 2030 Agenda: SDG 1 No poverty, SDG 2 No hunger, SDG 5 Gender Equality, SDG 8 Sustainable economic growth, and SDG 13 Climate adaptation measures. Essential Program outputs are: 1) National CRI concept papers are available; 2) Capacities of public and private actors to develop high quality CRI products are improved; 3) Proposals for CRI-relevant customer-oriented digital technologies are available; 4) The MEFIN network has established its presence as the knowledge hub of CRI. (Annex 2) The Program Approach will employ - 1) Capacity development measures; 2) Involvement of individual people (specialists and managers); 3) Involvement of organizations (insurance companies, aggregators and networks); 4) Involvement of civil society (selected community groups); and 5) Involvement of institutional framework actors (ministries and supervisors). CRI Challenges Four guest resource persons spoke at the Opening Session of the RFPI Asia III Operational Planning Workshop held on 12 and 13 February 2019, Makati City. These are Secretary Noel Felongco, National Anti Poverty Commission (NAPC); Executive Director Michael Rellosa, Philippine Insurers and Reinsurers Association (PIRA); Principal Financial Sector Specialist Mr Arup Kumar Chatterjee, Asian Development Bank (ADB)-Sustainable Development and Climate Change Department); and Commissioner Dennis Funa, Insurance Commission (IC). They discoursed on the relevance and need for Climate Risk Insurance (CRI) in the Philippines specifically among the Agriculture sector where many poor Filipinos are found. They however underscored the fact that there exist challenges that needed to be hurdled to fast track the offering of CRI solution in the country. Among those mentioned were: 1) Data is fragmented and tools are in their nascent stages; 2) Lack of data on vulnerabilities and lack of risk analysis; 3) CRI, for some agencies, is not part of the direct mandate; 4) Low awareness of insurance; 5) Low purchasing power; 6) Mindset change is slow; 7) No incentives for private insurers; and 8) Some insurance schemes might be working in silos. UNDERSTANDING CRI Two presentations 1) Integrated Climate (and Disaster) Risk Management, and 2) CRI: Concept and Practices, were presented by Dr Malagardis to broaden understanding of attendees on CRI. Highlights follow. Integrated Climate (and Disaster) Risk Management. 1) Insurance does not reduce but transfers residual risks; It may not be suitable in all cases and is not a stand-alone remedy to manage climate risks, but is one instrument within an integrated climate risk management approach; 2) Given the age of the new normal marked by more frequent and stronger natural disasters, an integrated climate and disaster risk management approach becomes necessary; 3) The presentation shared a MCII/GIZ-developed integrated climate and disaster risk management model with five stages: a) Prevention measures that help prevent or minimize possible damage from an event; b) Retention and Transfer conduct cost-benefit analysis to determine if pre-disaster financing or insurance would be 1

3 appropriate; c) Preparedness a complex set of activities such as setting up early warning systems, developing contingency plans, organizing various activities such as stockpiling of equipment, and coordination and training as cross-cutting issues; d) Response all emergency measures primarily aimed to saving human lives in the event of natural disaster; e) Recovery rebuilding efforts after the disaster; infrastructure and other areas of society must be rebuilt so that people can resume their livelihoods as quickly as possible (Annex 3) Climate Risk Insurance: Concept and Practices. A major consideration in Climate Risk Insurance (CRI) is how to close the protection gap. The presentation shared a model that summarizes Which risk? needs protection, Who carries the risk? and Risk transfer solutions at the micro, pooling and macro levels (Annex 4). The presentation also shared on the G7 InsuResilience the G7 Climate Risk Insurance Initiative in recognition of the important role CRI play in addressing adverse impacts of climate change. The following CRI schemes were shared 1) Caribbean and Central American Catastrophe Risk Insurance Facility (CCRIF): Insurance scheme covering tropical cyclones and earthquakes in Caribbean small island states. Currently expanding to Central America. New insurance products to cover excess rainfall and cyclones under development; 2) African Risk Capacity (ARC): Drought insurance for members of the AU in combination with early warning systems and contingency planning. Currently expanding to new countries. Founded by G7 partners GER, JAP, UK, and USA together with World Bank and PICs; and 3) Pacific Catastrophe Risk Insurance Facility (PCRAFI): Insurance scheme covering tropical cyclones and earthquakes in Pacific Island countries (PICs). Founded by G7 partners GER, JAP, UK, and USA together with World Bank and PICs. Suggested Strategies A number of strategies were likewise proposed to address the challenges. As an overall approach, the so-called ABC was recommended by ED Michael Rellosa, PIRA. It stands for A Acceptance of Vulnerability; B Belief in Insurance; and C Commitment to Making CRI Happen. In terms of addressing specific areas of concern, the following strategies were suggested. Policy-Related Strategies: Regulatory Sandboxes Innovation first, regulations later ; Utilization of public funds for CRI; Compulsory catastrophe insurance pool; Policy formulation to institutionalize CRI (Agencies roles and accountabilities should be defined); Harmonization of policies (PDP, Climate Adaption, Disaster Risk Management Plans); Insurance stakeholders to be more involved in DRM-Working Groups organized by the government; Incentivization scheme. Product-Related Strategies: Create a product prototype (similar to BBK); Financial solutions (not only insurance solution); Make use of tech for credit scoring, enrolment, claims management, etc.; Customer journey. Technology-Related Strategies: CRI tech platform / Data hub (big data analytics, AI, remote sensing to provide data on vulnerabilities); Risk mapping; Learning management platform insurance professionals. Awareness and Outreach-Related Strategies: Social media strategy; Risk sharing mechanism how to involve a community; Work with government agencies and private companies (awareness and capacity development activities). Partnership-Related Strategies: Developing Public Private Partnerships for CRI; Partnership among commercial companies, cooperative societies, MBAs, reinsurers; Data Sharing MOUs; 2

4 Tap donors for financial and technical support; Active engagement in the CRI working groups (RFPI Asia III)]. Operationalizing RFPI Asia III GIZ RFPI Asia III Promoting Climate Risk Insurance in 3 Southeast Asian Countries Implementation of RFPI III conceptual framework for the Philippines Program Approach RFPI III is making use of the model of MCII/GIZ 2017 in developing resilience through 5 phases of Disaster Risk Management: prevention, preparedness, residual risk transfer, response and recovery. Insurance, as among the instruments, in residual risk transfer shall be designed as part of the integrated solution of risk management. RFPI III program is implementing four (4) components: 1) policy and regulation, 2) business model, 3) use of technology and 4) CRI hub through the MEFIN Network 1. For the Philippines, the program components are being implemented through the framework below. Conceptual framework Entry points of the project Our approach Steering & Management Component 1: Policy and Regulation Integration/Elaboration of CRI Mapping of public agencies that can National Task agenda in the DRM and Climate provide support in areas of: Force on CRI Change Adaption national plans o Policy and regulatory reform composed of Finding resources for insurance in o Data public agencies fiscal policies Integration of insurance solution in social protection programs Component 2: Business model Understanding issues of data: availability, types, format, quality, sharing. Developing strategies to address data gaps and issues. Component 3: Use of Technology Understanding the challenges and gaps on effectiveness, efficiency & transparency of insurance delivery Analysis of regulation, supervision issues & gaps related to use of technology for: o Insurance policy acquisition, delivery and claims management o Raising awareness and for Advocacy o Funding o Network o Convenor Engaging appropriate agencies in program steering and technical work Developing platforms/engines that would systematically process data on hazards, exposure, vulnerability and data on losses. For purposes of o Product development and underwriting o Claims administration o For developing smart contracts To determine options for CRI product development and delivery Competition of insurtech companies to develop the technology platforms. Workshops to develop key (digitized) key messages on CRI. Information dissemination and advocacy. Sandboxing and insurance association program steering and direction 3 Technical Working Groups for technical and operational works, composed of public and private agencies Each of the components 1 to 3 has a TWG 1 MEFIN or Mutual Exchange Forum for Inclusive Insurance is a Network of insurance regulatory authorities in Asia working for a peer-to-peer exchange of knowledge and experiences with the insurance industry. See more details at 3

5 Entry points of the project Our approach Steering & Management o Knowledge Management (KM) through the MEFIN Network Component 4: CRI Hub through the MEFIN Network Use the existing structure of the Webinars MEFIN Network for peer-to-peer Public Private Dialogue conferences learning and public private Publication of knowledge products dialogue Steering Structure To steer the RFPI Asia III initiatives, a mechanism comprised of the National Task Force (NTF), three Technical Working Groups (TWGs), and a Secretariat was proposed at the OPW. The general descriptions of each are given below. The National Task Force (NTF): Purpose and Scope of Work 1) Serves as the steering body of RFPI III CRI Program; 2) Provides strategic direction of the program and approve its annual plans and progress reports; 3) Approves the scope of work and plans of the TWGs, and the composition of TWG members who can contribute to CRI market development; and 4) Participates in peer-to-peer knowledge sharing and dialogues for CRI policy and regulatory reforms through the MEFIN Network. Technical Working Groups (TWGs) Three TWGs will be created which correspond to the program components of RFPI III as follows: 1) TWG on Policy and Regulation (TPR), 2) TWG on Business Model (TBM); 3) TWG on Use of Technology (TUT). The 4th component of the program, which deals with CRI knowledge exchange and public private dialogue (PPD), will be managed through the existing platform of the MEFIN Network. Secretariat (Role of GIZ RFPI Asia III) 1) Provide secretariat and administrative support to the National Task Force and all 3 Technical Working Groups; 2) Conduct studies; 3) Conduct seminars to inform the works of the TWGs; 4) Provide technical advice to to the TWGs especially in the production of outputs. Way Forward Three way forward steps were agreed upon toward the close of the OPW. These are: 1) OPW Documentation Report due in a week s time after the activity (In Charge: OPW Lead Moderator); 2) 20 March 2019 will be first meeting of the National Task Force (NTF) (In Charge: RFPI Asia III Team); 3) First Meeting of the individual Technical Working Groups (TWGs) in April The NTF will decide on date, time and participants. 4

6 Annexes 5

7 Annex 1. Agenda Operational Planning Workshop for the Philippines February 2019/Dusit Thani Hotel, Makati City 12 February Activity/Topic 8:30 9:00 Arrival and Registration of participants 9:00-9:05 National Anthem 9:05 9:15 Welcome and Opening Remarks Dr. Antonis Malagardis, RFPI Asia III Program Director 9:15 9:30 Acknowledgement of Participants Overview of OP Processes Dr. Lorenzo Templonuevo, Moderator 9:30 10:00 Messages Sec. Noel Felongco, NAPC Comm. Dennis Funa, IC Mr. Michael Rellosa, Executive Director PIRA Mr. Arup Chatterjee, ADB 10:00-10:10 Photo Opportunity 10:10 10:45 Morning Snacks 10:45 11:00 Integrated Climate (and Disaster) Risk Management Dr. Antonis Malagardis, RFPI Asia III Program Director 11:00 11:20 Climate Risk Insurance: Concepts and Practices Dr. Antonis Malagardis, RFPI Asia III Program Director 11:20 12:00 Q & A 12:00 13:00 Lunch 13:00 13:15 Highlights of CRI Challenges and Strategies in the Philippines Ms. Shayne Bulos, RFPI Asia III Senior Adviser 13:15 14:00 Reflection, Discussion, and Validation Workshop Participants and Moderator 14:00 14:15 RFPI III: An Overview Dr. Antonis Malagardis, RFPI Asia III Program Director 14:15 15:00 Q & A 15:00 15:15 Afternoon Snacks 15:15 16:45 Conceptual Framework of the Project Components Dante Portula, RPFI Asia III Senior Adviser Q & A 16:45 17:00 Wrap-Up Dr. Lorenzo Templonuevo, Moderator 6

8 13 February Activity/Topic 9:00-9:30 Arrival and of Attendance participants Preliminaries 9:30 9:40 Day Two Overview Dr. Lorenzo Templonuevo, Moderator 9:40 9:50 Day 1 Recapitulation Dr. Lorenzo Templonuevo, Moderator 9:50 10:00 Group Photo Operational Planning 10:00 10:15 Mechanics Dr. Lorenzo Templonuevo, Moderator 10:15 12:00 Output 1 National CRI concept papers are made available. Breakout Groups Workshop Output 2 Capacities of public and private actors to develop high quality CRI products are improved. Moderator Moderator Mr. Jimmy Loro Mr. Dante Portula Breakout Group Presentations 12:00 13:00 Lunch 13:00 13:15 Breakout Group 1 Breakout Group 1 Presenter Output 3 Goal Proposals for CRI-related customer- oriented digital technologies are made available. Moderator Ms. Shayne Bulos 13:15 13:30 Q & A Workshop Participants, Breakout Group Presenter, Moderator 13:30 13:45 Breakout Group 2 Breakout Group 2 Presenter 13:45 14:00 Q & A Workshop Participants, Breakout Group Presenter, Moderator 14:00 14:15 Breakout Group 3 Breakout Group 3 Presenter 14:15 14:30 Q & A Workshop Participants, Breakout Group Presenter, and Moderator 14:30 14:45 RFPI 3 Steering Structure and Process: A Proposal Mr. Alexander Tabbada, RFPI Asia III Senior Adviser 14:45 15:00 Q & A Workshop Participants, Moderator 15:00 15:10 Way Forward Agreements Workshop Participants and Moderators 15:10 15:20 Evaluation 15:20-15:30 Wrap up Dr. Lorenzo Templonuevo, Moderator Closing A Senior Executive from any of the key actors 15:30 Networking Cocktails 7

9 Annex 2. RFPI Indicators Diagram RFPI III Indicators Diagram Deliverables at the OBJECTIVE level indicators Deliverables at the RESULTS level indicators OI.1 OI.2 OI.3 OI.4 3 partner governments have included CRI explicitly targeting the poor, the extremely poor, and most atrisk in their national resilience strategies. 4 million (50% women) of the poorest and most at-risk populations in three partner countries are covered by new CRI products offered by governments. 3 new digitally supported business models, 1 of which focuses on payment modalities, have been introduced with insurers 2 international standard implementation plans for the regulation of CRI solutions have been developed by insurance supervisors of the partner countries. Component 1 Nat l CRI Concept Paper Component 2 Product Development Component 3 Puse of digital technologies Component 4 MEFIN network, a CRI hub R1. 1 R1. 2 R1.3 R1. 4 R1. 5 R1. 6 R CRI concept papers developed by the National CRI Task Forces Cross-border criteria for high-quality CRI products are coordinated by relevant actors In 2 countries, members of 2 CRI insurance groups are qualified to develop high quality products 4 new CRI-relevant knowledge products on digital technologies are developed together with insurers and presented at 4 different events 3 Proposals for customer protection regarding the regulation of digital technologies (including cyber security) in CRI products have been promulgated with the insurance supervisors in cooperation with A2ii. 5 of 7 MEFIN-affiliated insurance supervisors agree that the project-supported events and knowledge products of the 3 insurance regulators in 3 partner countries are useful in implementing CRI and A2iirelated topics for the implementation of regulations. Roadmap for sustained support of insurance supervisors to inclusive insurance markets & the strengthening of MEFIN has been developed with the A2ii. Page 6 8

10 Annex 3. Integrated Climate (and Disaster) Risk Management 9

11 Annex 4. Closing the protection gap 10

12 Annex 5. Participants List Operational Planning Workshop for the Philippines February 2019/Dusit Thani Hotel, Makati City No. Name Organization 1 Atty.Dennis Funa Insurance Commission (IC) 2 Atty. Juan Paolo Roxas Insurance Commission (IC) 3 Aurora Luz Villaviray Department of Finance (DOF) 4 Annabelle Magno Department of Finance (DOF) 5 Meryll Gregorio Department of Finance (DOF) 6 Ricardo Toquero Department of Finance (DOF) 7 Donalyn Minimo Department of Finance (DOF) 8 Giovanni Bahia Department of Finance (DOF) 9 Angelica Natividad Department of Finance (DOF) 10 Julius Hontiveros Office of Civil Defense (OCD) 11 Ted Lago Office of Civil Defense (OCD) 12 Marvin Arias Office of Civil Defense (OCD) 13 Azriel Chelluh Valdez Climate Change Commission (CCC) 14 Noel Felongco National Anti-Poverty Commission (NAPC) 15 Karla Felongco National Anti-Poverty Commission (NAPC) 16 Cris Sabal National Anti-Poverty Commission (NAPC) 17 Elvin Cajandig National Anti-Poverty Commission (NAPC) 18 Dario Cubelo National Anti-Poverty Commission (NAPC) 19 Arup Chaterjee ADB 20 Katrina Gonzales Blockchain Assoc.of the Phils 21 Ghay Mapano Cebuana Lhuillier Insurance Solutions (CLIS) 22 Jonathan Batangan Cebuana Lhuillier Insurance Solutions (CLIS) 23 Ma.Theresa Villarama Pru Life UK 24 Aira Labao Card Pioneer 25 Rose Abanto Pioneer Life Insurance 26 Greg Barrios Phil. Insurers and Reinsurers Association (PIRA) 27 Michael Rellosa Phil. Insurers and Reinsurers Association (PIRA) 28 Roger De Pedro Microensure 29 Deal Noel Benegrado Cooperative Life Insurance Mutual Benefits Association (CLIMBS) 30 Noel Raboy Cooperative Life Insurance Mutual Benefits Association (CLIMBS) 31 Uly Zulueta Cooperative Life Insurance Mutual Benefits Association (CLIMBS) 32 Donna Dizon Cooperative Life Insurance Mutual Benefits Association (CLIMBS) 33 Bernard Reyes Western Guaranty 34 Freddie Magno Western Guaranty 35 Lorenzo Chan Card Pioneer 36 Marc Gorospe AXA 37 Francis Alvarez Nat-Re 11

13 No. Name Organization 38 Alexander Reyes Nat-Re 39 Gelizabeth Cabuhat ICISP 40 Kristine Torres ICISP 41 Ben De Vera Inquirer News 42 Imelda Abano Phil. EnviroNews 43 Manny Musch Reuters News RFPI Team 12