State pension fund Government Service Insurance System (GSIS) now provides government agencies with a parametric insurance cover that grants immediate pay-out for post-disaster recovery.
Under Republic Act No. 656 (Property Insurance Law), GSIS is mandated to insure government properties, assets, and interests from calamities.
The Php10 billion program, launched by the Philippine government through the support of the World Bank and the U.K. Department for International Development last July 28, is the first of its kind in the country. It covered losses of national government offices (typhoons and earthquakes) and 25 provinces (typhoons).
25 provinces with typhoon insurance cover include Albay, Aurora, Batanes, Cagayan, Camarines Norte, Camarines Sur, Catanduanes, Cebu, Davao del Sur, Davao Oriental, Dinagat Islands, Eastern Samar, Ilocos Norte, Ilocos Sur, Isabela, Laguna, Leyte, Northern Samar, Pampanga, Quezon, Rizal, Sorsogon, Surigao del Norte, Surigao del Sur and Zambales.
The local government units (LGUs) were selected based on their exposure to typhoon and/or earthquake risk, based on the catastrophe modelling by AIR Worldwide. The LGUs welcome the parametric insurance cover since the pay-out will augment their funds to enable them to immediately respond to the needs of their constituencies following a natural catastrophe.
As early as 2014, GSIS begun discussions with the World Bank and the Department of Finance for the preparation of a joint catastrophe risk insurance program. Funding was allocated by the government under the National Disaster Risk Reduction and Management Fund of the 2017 General Appropriations Act in the amount of Php1 Billion, championed by Senator Francis “Chiz” G. Escudero.
The Technical Working Group, composed of representatives from GSIS, Department of Budget and Management, Department of Finance, National Economic Development Authority, Office of Civil Defense, Department of Interior and Local Government, Commission on Audit and Bureau of Treasury, finalized the implementing guidelines.
World Bank considers the Philippines as one of the countries in the world that is vulnerable to natural disasters and is bound to lose an average of US$3.5 billion in assets annually due to typhoons and earthquakes.
Catastrophe risk insurance provides immediate cash crucial for post disaster activities relating to government infrastructure and facilities needed to restore operations and immediate delivery of basic services. It complements the existing type, indemnity insurance, which pays the actual loss incurred by the insured.
The World Bank helped the government achieve the best terms and conditions for this transaction by issuing a reinsurance contract to GSIS and ceding the risk to international reinsurance markets. (GSIS)