PH parametric insurance gets maximum cover – BTr
The Philippines has successfully placed on the international market its parametric insurance policy with a maximum cover of 120.49 billion that can provide quick liquidity to national and local governments, the Bureau of the Treasury (BTr) said yesterday.
According to the Treasury, the program includes coverage for national and local government assets against natural calamities including public elementary and high schools in 25 disaster-prone provinces in the country’s eastern seaboard. In a report to Finance Secretary Carlos G. Dominguez III, National Treasurer Rosalia de Leon said the Parametric Insurance Policy will enable the 25 catastrophe-vulnerable provinces and the national government to act faster and respond better against natural calamities.
The policy will become effective starting December 19, 2018 midnight, De Leon said.
She said that in addition to the reinsurers in 2017, which include Nephila, Munich Re, Swiss Re, AXA and Hannover Re, a new set of reinsurers also provided support for the cover. They are Hiscox Re, Allianz Re Switzerland, AP3 (Tredje AP-fonden), and SCOR.
“With the increased market participation, we were able to achieve a tighter multiple this year compared to last year’s transaction,” De Leon said in her report to Dominguez.
De Leon, said this positive development “augurs well for our forthcoming indemnity and catastrophe bond issue.”
With assistance from the World Bank, the insurance program covers 25 provinces along the Eastern Seaboard.
The premium for the program was allocated under the National Disaster Risk Reduction and Management Fund of the 2018 General Appropriations Act in the amount of 12 billion.
Under this program, the Government Service Insurance System (GSIS) provides catastrophe risk-insurance coverage particularly for the Department of Education along with the 25 selected provinces.
The World Bank, through its International Bank for Reconstruction and Development, acts as the intermediary to transfer or cede GSIS risks to the global reinsurance market, thus minimizing risks for the government.
Its Disaster Risk Financing and Insurance Program provided preparation work with financial support from the UK-DFID.
In turn, the Treasury is the designated policyholder, representing the 25 provinces and the national government.
Finance Assistant Secretary Paola Alvarez has said during the early stages of the program that unlike the traditional indemnity insurance that takes a long time to assess and process, this program will have quick-disbursing payouts.
She, however, said the amount will depend on the estimated loss triggers determined through the Philippines’ Catastrophic Risk Model developed by the DOF in 2014 as well as damage reports from the ground.
In addition to the Parametric Insurance Program, the Department of Finance (DOF) is exploring a plan to sponsor a Catastrophe Bond (Cat Bond) to help bridge the financing gap the Government faces in the light of natural disasters.