Held on July 10 and 11, 2024 in Makati, Philippines, 20th Asia Nat CAT and Climate Change Summitby title: “Building resilience: Building a future-proof insurance industry in the face of Nat Cat threats“, organized by Asia Insurance Review.
In 2023, global insured losses from natural disasters rose to around $23 billion, surpassing the $100 billion mark for the fourth consecutive year according to Gallagher Rea, in the Asia-Pacific region alone, natural disasters caused a staggering $65 billion in economic losses, of which 91% are uninsured (Aon plc).
Natural disasters are becoming more frequent and more serious due to climate change. The Philippines, identified as one of the countries most vulnerable to the effects of climate change, is leading the way in addressing these threats. Rising sea levels and extreme weather conditions are just some of the challenges facing the country.
Speakers at the 20th Asia Nat CAT and Climate Change Summit 2024 discussed the key role of the insurance sector in providing protection and securing the future against the growing threats of climate change and natural disasters.
In his first public speech, Insurance Commission of the Philippines Commissioner Reynaldo A. Regalado said that “Insurance has proven to be a reliable financial tool that can protect lives, property and business from various risks and losses. Likewise, insurance plays a vital role in strengthening resilience to climate change and natural disasters. With the increasing frequency and severity of natural disasters, it has become even more important that individuals, businesses and institutions have adequate and robust insurance.”
One of the significant measures taken by the Insurance Commission was the creation of the Philippine Catastrophe Insurance Fund (PCIF) where non-life insurers will be able to shift catastrophe risks to a more diversified and larger pool, shared with participating companies.
“PCIF is believed to increase the Philippines’ financial resilience to natural disasters by addressing the national disaster insurance gap, creating more risk-appropriate ratings, increasing the capacity of the Philippine insurance sector to contain disaster risks, and providing the public with greater access to including insurance coverage,” Regalado said.
Regalado added that agricultural insurance is also becoming an urgent need, given the increasing frequency of extreme weather and natural disasters affecting local farmers.
“The Ministry of Agriculture attributed damage to agriculture of a total of 9.8 billion euros ($1.7 million) due to the drought caused by the El Niño phenomenon. Regalado explained. “This is a huge blow to over 180,000 farmers and fishermen. Insurance could help our farmers recover and recover from losses”.
Jose Arnulfo Veloso, President and General Manager of the Government Service Insurance System (GSIS) said that “Climate change is resulting in increasingly extreme weather conditions, making Nat CAT more frequent and more severe. Despite the increased risks, there are significant disadvantages in insurance. For example, only about 20% of residential buildings in our country are insured against natural disasters. This means that a large number of individuals and businesses are at the mercy of the weather, and in the event of an extreme climate event, they do not have the resources necessary for recovery.”
According to Velos, parametric insurance is a fundamentally innovative solution.
He further said that public-private partnerships can effectively address Nat CAT risks and that regulatory frameworks are essential to enable insurers to offer innovative solutions.
“As climate change continues to alter weather patterns, the Philippine insurance industry must constantly adapt. This includes re-evaluating risk models, developing new products and containing new threats. Continuous research and innovation are key to understanding and mitigating future risks. To build a future-proof insurance sector in the Philippines, we must embrace innovation and take proactive measures. Insurers, governments and communities must work together to develop comprehensive strategies that improve our resilience to Nat CAT threats.”