Nat CATs are becoming frequent and severe because of climate change. The Philippines, having been identified as one of the most vulnerable countries to the effects of climate change, is at the forefront of facing these threats. The rising sea level and extreme weather events are just some of the challenges the country faces.
Speakers at the 20th Asia Nat CAT and Climate Change Summit 2024 discussed the crucial role of the insurance industry in providing protection and securing the future against the growing threats of climate change and natural disasters.
Speakers also placed emphasis on the importance of disaster preparedness and risk management in addressing the uncertainties and challenges posed by these threats.
In his first keynote address to the audience, Insurance Commission insurance commissioner Atty. Reynaldo A. Regalado said, “Insurance has been proven to be a reliable financial instrument that could safeguard lives, livelihood and properties against various risks and losses. Likewise, insurance plays a vital role in building resilience against climate change and natural disasters. With the increasing frequency and severity of natural catastrophes, it has become even more crucial for individuals, businesses and institutions to have adequate and robust insurance coverage.”
One of the significant measures the Insurance Commission has taken was the creation of the Philippine Catastrophe Insurance Facility (PCIF) where non-life insurers will be able to redirect their catastrophe risks to a more diversified and larger pool that is shared with the participating companies, Mr Regalado said.
“The PCIF is seen to increase the Philippine financial resilience against natural disasters by addressing the nation’s catastrophe insurance gap, create a more risk-appropriate rating environment, increase the Philippine insurance industry’s capacity to retain catastrophe risks and provide the public with a more inclusive access to catastrophe insurance protection,” he said.
In addition to the developments, Mr Regalado said agriculture insurance is also becoming urgent and indispensable given the escalating frequencies of extreme weather events and natural calamities affecting the local farmers.
“The department of Agriculture has accounted a total of ?9.8bn ($1.7m) worth of agricultural damages due to the droughts caused by the El Niño phenomenon. This is a huge blow for more than 180,000 of farmers and fisherfolks. In instances like this, insurance could help our farmers bounce back and recover from their loss,” he added.
As second keynote speaker, Government Service Insurance System (GSIS) president and general manager Jose Arnulfo Veloso discussed how insurers can forge resilience and build a future-proof insurance industry that will be capable of facing a growing threat of Nat CATs.
“Climate change is driving more extreme weather patterns making Nat CATs more frequent and severe. Despite the rising risks, there are significant gaps in insurance coverage. For example, only roughly 20% of residential properties in our country are insured against natural disasters, leaving many individuals and businesses vulnerable and without the means to recover,” Mr Veloso said.
He said parametric insurance is an innovative solution that pays out based on predefined triggers such as the wind speed of a typhoon or the magnitude of an earthquake.
He also said successful public-private partnerships can effectively address Nat CAT risks and supportive regulatory frameworks are essential for enabling insurers offer innovative solutions.
“As climate change continues to alter weather patterns, the insurance industry in the Philippines must continuously adapt. This includes reassessing risk models, developing new products and staying ahead of emerging threats. Ongoing research and innovation are crucial to understanding and mitigating future risks.”
“To build a future-proof insurance industry in the Philippines, we must embrace innovation and take proactive measures. Insurers, governments and communities need to work together to develop comprehensive strategies that enhance our resilience against Nat CAT threats,” he said.
The 20th Asia Nat CAT and Climate Change Summit 2024 organized by Asia Insurance Review runs from 10 to 11 July 2024 in Manila, Philippines.