Can the Pacific be insured?

Source(s): Devex
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By Lisa Cornish

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A critical challenge in responding to disasters is access to short-term, immediate financing for emergency response and maintenance of essential government services — which also limits secondary economic and social effects, including increased incidence of poverty. But the reliance of many countries on aid can limit their borrowing capacity. In Nieu, for example, aid is 42% of GNI. Supporting populations in remote and regional areas of Pacific Island countries can also increase recovery costs and vulnerability.

The hope is that insurance can be a solution to help with the immediate funding needed — and a range of offerings are available. But most of them, [Vijaya] Ramachandran [a senior fellow at the Center for Global Development] said, are “not well-considered,” including credit lines which risk creating debt distress for disaster-affected countries.

Premiums are the biggest barrier including for the Pacific Catastrophe Risk Insurance Company, a World Bank initiative that is supporting four countries in the immediate response to cyclones, earthquakes, and tsunamis.

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Overcoming the barriers

There are a number of key improvements that Ramachandran recommends to make insuring Pacific Island countries viable. One is linking resilience to the premiums charged — something that is not currently done. Ramachandran sees this as an important opportunity to help Pacific Island countries and their partners to support better investment and additionally reduce premiums as risk lowers.

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