Philippines: New approach to disaster risk funding mooted

Source: AIR eDaily | 22 Jan 2014

Global insurance giants, Munich Re and Willis Re, have teamed up with the United Nations Office for Disaster Risk Reduction (UNISDR) to propose a major new approach to catastrophe risk financing for the Philippines in advance of this year's typhoon season as the country continues to deal with the economic fall-out of US$13 billion in losses from Typhoon Haiyan which struck last November.
The catastrophe scheme developed by Munich Re and Willis Re, the Philippines Risk and Insurance Scheme for Municipalities (PRISM), is a fast track way of providing budgetary support in the aftermath of a major natural disaster.

In a statement, Mr Rowan Douglas, CEO Capital, Science and Policy Practice, Willis Group, explained: “Contrary to traditional insurance, the payment of claims is not based on actual losses but on a pre-agreed amount when a specific trigger is met. For example, insurance will be paid out in the event of rainfall exceeding a certain amount, or wind speed exceeding a certain threshold.” Mr Douglas is a member of the UNISDR Private Sector Advisory Group.

Mr Ernst Rauch, head of the Corporate Climate Centre of Munich Re, said: “These parametric triggers are based on industry standards and can evolve as more information becomes available. Once one trigger has been exceeded, a payment will be made through the scheme manager to the local government unit and this can be used for rescue, relief, recovery or re-building depending on needs assessments. It can become a key part of broader national catastrophe risk management programme. Cover can be adjusted to reward disaster risk reduction efforts undertaken by municipalities.”


The head of UNISDR, Ms Margareta Wahlström, said: “The Philippines is hit by over 20 typhoons every year. What is needed is a simple scheme which will provide valuable protection to people and municipalities before the next typhoon season. In order to be successful it will require mandatory take-up by local government units but it will make them masters of their own destiny when it comes to responding to relief and recovery needs in the wake of a major disaster event." UNISDR is the UN office dedicated to disaster risk reduction.