Given the scale of the protection gap in Asia, the region is the focus of several initiatives aimed at improving access to insurance and building resilience to catastrophic events.
These initiatives cover a range of approaches, including multi-country risk pooling facilities, other public-private partnerships and parametric-based covers, as well as micro-insurance offerings targeting underserved communities.
The Southeast Asia Disaster Risk Insurance Facility (SEADRIF) currently has eight member countries – Cambodia, Indonesia, Laos, Myanmar, Philippines, Singapore, Japan and Vietnam – with the World Bank as the lead technical partner.
The facility provides insurance solutions through SEADRIF Insurance Company, which was established in Singapore in 2019.
Like other multi-country risk pooling facilities, SEADRIF provides coverage to governments in the region and serves as a platform for rapid payouts following a loss event.
In August this year, the facility made two payouts totalling $1.5m to support flood relief efforts in Laos. While Laos’ insurance contract with SEADRIF has a parametric component, the two payouts were made through a “finite risk” component, which is designed to address the basis risk where losses are incurred but parametric triggers have not been met.
SEADRIF is one of a number of sovereign risk pools operating around the world. Earlier this month, it signed an agreement to deepen cooperation with three other multi-country pools – African Risk Capacity, CCRIF SPC and the Pacific Catastrophe Risk Insurance Company – which includes discussions on the creation of a joint reinsurance facility.
The cost of reinsurance remains a key challenge for sovereign risk pools, and at a recent Gallagher re-convened meeting in London they confirmed a shared interest in exploring with donors and development partners the creation of a joint facility that would promote a more efficient use of capital and better facilitate global risk transfer to reinsurance and capital markets. This would further enable risk pools to expand their offerings.
Discussions have also taken place on the creation of an additional sovereign risk pool for Central Asia, led by the Asian Development Bank. A working paper setting out a roadmap for the development of such a facility was published in July this year. WTW is working with the Central Asia Regional Economic Cooperation Programme to develop a framework for a risk pool in the region.
Local projects
Across the Asia Pacific region, a number of more localised initiatives are taking place to increase the resilience of communities and businesses in the region.
In South Asia, WTW launched a four-peril parametric insurance product in July this year to unlock funding for aquaculture development in Sri Lanka, which the broker designed and placed on behalf of Taprobane Seafood Group, the country’s largest seafood company.
The broker has also worked with the charity Rare, with funding from the UK’s Blue Planet Fund and the Canadian government through the Ocean Risk and Resilience Action Alliance, to pilot a parametric insurance solution for fishermen in the Philippines to address income losses caused by prolonged periods of bad weather that prevent safe fishing.
Simon Young, WTW’s senior director for catastrophe risk finance and parametrics, told The Insurer that it is hoped to launch a pilot in 2024. “We have developed similar programmes in Indonesia, several Pacific islands and the Caribbean,” he said.
Earlier this month, microinsurance consortium Blue Marble launched a pilot insurance programme to protect smallholder coffee farmers in Indonesia from the effects of changing weather patterns.
The pilot, in partnership with Nestlé, covers more than 80 smallholder farmers who supply coffee to the Nescafé brand.
Another example of microinsurance in the region is the Microinsurance Market Development Project in Bangladesh.
During the first phase of the project, 920,000 farmers were able to purchase crop and livestock insurance, with some 155,000 farmers and micro-enterprises receiving insurance payouts of more than $900,000.
Alongside the development of these initiatives, several projects are underway to improve risk education across the region.
Perhaps the most high-profile of these is the Global Risk Modelling Alliance (GRMA), which was launched during the COP26 climate talks in Glasgow.
The GRMA is a public-private partnership established to help countries better understand the risks they face, so they can make more informed decisions about resilience and disaster risk reduction measures.
Pakistan has been selected as the first partner country for the initiative, which will support the development of Pakistan’s first national adaptation plan and long-term climate strategy.
Initiatives such as this can play a vital role in developing resilient and informed communities across the region.
