Flirting with disaster? World Bank’s push for climate insurance questioned
In August, the World Bank announced a new sovereign catastrophe risk insurance program in the Philippines, which provides $206 million worth of aggregate coverage for federal government assets from earthquakes and typhoons, as well as providing typhoon insurance for 25 provincial governments. The Bank noted, “Under this new program [the] government-owned insurance agency Government Service Insurance System (GSIS) will provide catastrophe risk insurance to the national government and the participating provinces.” As an intermediary the Bank will act “to transfer GSIS’s risk to a panel of international reinsurers”. The Philippines suffers an estimated $3.5 billion in damages from typhoons and earthquakes annually, and the World Bank stressed that the new program is, “the last line of defense against severe natural disasters and complements other funding sources.” Pay-outs under the scheme are based on parametric triggers. A World Bank spokeswoman noted in an email to the Bretton Woods Project, “Because it relies on parametric triggers, pay-out as estimated by the catastrophe risk model may not perfectly match the actual damage,” adding that the premium cost to the Philippines was $19.5 million. The one-year program began on 28 July.
The program marks one example of the Bank’s promotion of climate insurance over the past decade, as part of a wider approach focused on leveraging private insurance and investor markets to increase ‘pre-arranged’ disaster risk financing.
Photo courtesy of Shever.