Regional insurance against disasters proposed for APEC economies

From the Department of Finance

Philippine's insurance pooling model for disaster-prone provinces cited

Bacolod City, Philippines - A suggestion for the 21 member-economies of the Asia-Pacific Economic Cooperation (APEC) to have a regional insurance against disaster risk has been presented during an APEC seminar held in this city titled “Disaster Risk Finance – APEC Roadmap for Resilient Economies.”

Richard Poulter, a specialist on disaster risk financing and insurance from the World Bank, said accessing insurance against disasters may be expensive for a single economy, but the cost can be significantly reduced with economies of scale.

Poulter suggested that APEC economies may pool their disaster risks and then tap insurance collectively from an international insurance provider.

He cited the model that the Philippines is pursuing for some of its provinces, adding this may be applied on a regional scale.

In particular, the Philippines has secured the assistance of the World Bank in developing an insurance framework wherein disaster-prone provinces will pool risks and then have these risks insured collectively. In case a province is hit by disaster, it can file claims from the insurance facility.

“In so many ways the Philippines has been leading efforts toward [disaster] resiliency, and the model it is pursuing is an example,” Poulter said April 30 in a presentation delivered toward the closing of the two-day APEC seminar.

Regional insurance is one of the proposals for disaster resiliency that APEC member-economies may consider discussing in detail in succeeding meetings.

Other proposals raised were establishment of a catalogue showing risk exposures of member-countries, creation of a platform showing data on insurance coverage of public assets, and engagement of the private sector in disaster risk financing.

Meantime, the Philippines reiterated the need for a proactive approach toward enhancing disaster resiliency across APEC member-economies.

“The APEC region serves as a growth driver for the world economy. Given that the region is prone to natural disasters, collective efforts to boost disaster resiliency are vital in ensuring that our region continues to have significant contributions to global growth,” said Philippines’ Finance Undersecretary Gil Beltran, who serves as head of the overall organizing committee for the APEC gathering in city.

Besides exploring means for APEC member-economies to access disaster risk financing, participants to the two-day APEC gathering also discussed proposals to widen penetration of microinsurance.

Given its affordability, microinsurance is seen as an effective tool to protect more people and enterprises against adverse effects of disasters.

The Philippines’ Finance Secretary Cesar V. Purisima welcomed the developments from the meetings saying, “I am pleased to find that the technical working groups of the member economies have made significant strides in developing the APEC Roadmap for Resilient Economies. Disasters do not impact all our citizens equally: the poor suffer the brunt of their effects, and lose much more of what they have than others.”

“Thus I applaud the focus on financial inclusion, through microinsurance, as one of the best shields our most vulnerable can use against disasters. With this roadmap, disasters need not be disproportionately devastating for the poor,” Purisima added.

The two-day meeting in Bacolod City was attended by 92 participants from the technical working groups of finance ministries as well as finance experts across the APEC region.

Finance ministries across the region will discuss in further detail the proposals raised during the APEC event in Bacolod and decide what may potentially be included in the Cebu Action Plan (CAP).

CAP is the overall finance-related development roadmap for the APEC region that is being drafted by the Philippines while taking inputs from other APEC member-economies.

It is targeted to be completed in time for the APEC Finance Ministers’ Meeting, which will be held in Cebu City, Philippines in September.