VIETNAM CATASTROPHE RISK Country risk profile and methodology. NGO VIET TRUNG Deputy Director General Insurance Supervisory Authority 1

Transcription

1 VIETNAM CATASTROPHE RISK Country risk profile and methodology NGO VIET TRUNG Deputy Director General Insurance Supervisory Authority 1

2 NATURAL HAZARD PROFILE One of the world s most exposed countries to multiple natural hazards (ranking 3 rd in ASEAN members) 60% of total land area and 71% of population are vulnerable to typhoons and floods Annual average direct economic losses: US$1.5b or 0.8% GDP 2

3 EXPOSURE ESTIMATION Top 5 events and years ranked by economic loss during

4 Average annual loss by peril by sector 4

5 CURRENT POLICIES The Law on Natural Disaster Prevention and Mitigation (2014); the Law on State Budget (2015); Decree No.94/2014/ND-CP on natural disaster prevention and mitigation funds. Contingency (from both central and local level) funds has been adequate to finance post-disaster relief and recovery expenditures. 39/63 provinces have set-up natural disaster prevention and mitigation funds. Successful agro insurance pilot program ( ) against natural disasters (typhoons, floods, droughts...) and diseases sponsored by the Government; P&C Insurance products with natural disaster risks coverage provided by commercial insurers. On-going technical assistance provided by WB-SECO, ADB, Spain, German (GIZ) have helped developing legal framework, technology transfer and capacity building. 5

6 CURRENT METHODOLOGY Development of legal framework for financing natural disaster. Development of nat-cat insurance policy/mechanisms and nat-cat insurance market. International assistance and engagement in developing nat-cat insurance. 6

7 CHALLENGES No strategic framework on prioritizing disaster risks financing and insurance solutions State Budget: Unclear spending sequencing and demarcation of spending responsibilities (central vs. local); funding source (budget lines). Slow implementation of natural disaster prevention and mitigation funds (30/63 provinces established funds). Pilot nat-cat insurance program: tight budget; lack of strong political support. Insurance market: no stand-alone insurance products; pricing issue (lack of nat-cat modeling), inappropriate reserves, weak domestic financial capacity; low public awareness. 7

8 RISK ASSESSMENT FRAMEWORK EXPOSURE: Database comprises both population and public and private assets at risk from natural catastrophes. HAZARD: Development of a catalogue of simulated events consistent with events occurred in the past VULNERABILITY: Estimate the distribution of damage and losses caused to assets of different classes of vulnerability by different levels of hazard intensity caused by future events FINANCIAL LOSS: calculated for each asset damaged by any simulated future event 8

9 Catastrophe modelling framework 9

10 Vietnam exposure summary 10

11 HAZARD FLOOD: Using 2D hydrodynamic modelling approach. TYPHOON: Using 3D hydrodynamic modelling approach. EARTHQUAKE: Modelling seismicity, geological and fault data of the region. 11

12 VULNERABILITY Some of the key features of the model s damage functions: Separate damage functions for wind, earthquake, inland flooding and coastal flooding Damage functions vary by economic sector and, within each one, by the vulnerability of each class of assets that are defined on the basis of construction type, height and year built. Secondary modifiers to account for some distinctive characteristics of some assets within each class that have a major impact on vulnerability Separate damage functions for estimating building and contents losses Modifiers that capture variability in regional vulnerability 12

13 FINANCIAL LOSS Historical loss data Impact Forecasting s software 13

14 LESSONS Political support from the top leaders will be one of the decisive factors. Policies and regulations should be suitable with the country nat-cat specific characteristics and conditions, taking into account international best practice. Active involvement of key line ministries such as Ministry of Agriculture and Rural Development, Ministry of Natural Resources and Environment, Ministry of Science and Technologies...and local governments. Support from international community (WB, ADB, SECO and other donors) for technical assistance, capacity building and international reinsurance engagement. 14

15 DIRECTION FOR FUTURE Fulfilling legal policies related to nat-cat insurance (Law on public assets, requiring assets which are most exposed to natural and man-made disasters should be insured etc. Fufilling regulations on the operations, revenue collection and expenditures of natural disaster prevention and mitigation funds. Building and validating Vietnam-specific nat-cat modeling for major hazards (cyclones, floods ). Continuing to implement pilot nat-cat insurance programs Developing database on property insurance (policy and historical losses). Receiving supports from international community in developing natural disaster financing and insurance solutions. 15

16 IMPLEMENTATION Development of Vietnam specific nat-cat modeling Pilot programs for nat-cat insurance to test products, policy and public-private partnership before promoting nation-wide. Promotion of nat-cat insurance business via financial/non-financial incentives (taxes, administrative red-tape cuts,etc). Promotion of nat-cat risk pooling arrangements among insurers on voluntary basis and with support from international reinsurers. Policies for financial soundness of insurers doing natcat insurance business (capital adequacy, appropriate technical reserves, risk-based pricing,etc). 16

17 SOURCE: World Bank Insurance Supervisory Authority, Ministry of Finance of Vietnam 17

18 THANK YOU 18