Organisations and authorities have come together in the Philippines to finalise the establishment of the Philippine Catastrophe Insurance Facility (PCIF), designed to improve the country’s financial resilience against natural disaster events.
The country’s Insurance Commission (IC), alongside the National Reinsurance Corp. of the Philippines (Nat Re) and the Philippine Insurers and Reinsurers’ Association (PIRA) have collaborated over the new facility.
The IC hopes to rollout the catastrophe insurance facility in the first-quarter of 2021, which would allow non-life insurers to cede their catastrophe risks to this insurance pool.
The PCIF then shares the pooled risks back to the non-life carriers, enabling these firms to more efficiently manage their catastrophe exposures and at the same time boost their capacity to assume more catastrophe risks.
Such a facility can be vital in places like the Philippines, which is extremely vulnerable to a range of natural catastrophe events and at the same time, has low levels of insurance penetration meaning that when disaster strikes, recovery can be hard and drawn out.
“We recognize the significant role that the non-life insurance industry should play in ensuring the Philippines’ catastrophe resilience and in bridging the catastrophe insurance gap that we need to urgently address as our country is among the most vulnerable to the onslaught of natural calamities,” said IC Commissioner Dennis Funa during his presentation of the IC’s 2021 plans and targets to Finance Secretary Carlos Dominguez III.
According to Funa, with the facility in place, communities, businesses and households can speed up recovery after large losses arising from catastrophic events such as typhoons and earthquakes.
Furthermore, the facility has been designed to establish a more risk-appropriate rating environment which would help to ensure sustainable catastrophe premiums and open up the availability of catastrophe insurance to more people.
Currently, domestic insurers that provide catastrophe protection reinsure their risks oversees. However, the PCIF ensures that pooled resources keep the majority of the funds onshore and enable non-life carriers to expand the premium base, which would in turn allow for the creation of new catastrophe solutions.