Graham Jones, Senior Vice President
According to United Nations estimates, 54 percent of the world’s population lives in Eastern, Southern and Southeastern Asia. The region hosts 778 million urban inhabitants and seven out of the world’s top ten most populated cities. The region is also home to every major peril – from cyclone to tsunami – and has experienced some of the world’s largest catastrophes based on economic loss. While there are natural catastrophes all over the world, Asia is a unique confluence of people and perils.
Many risks remain uninsured as insurance penetration continues to lag well below global averages. According to data from Munich Re, over the last 25 years, six of the top ten earthquakes based on economic loss have originated in Asia, generating over USD 460 billion of loss. Only four percent of the loss was insured. Similarly, five of the top ten flood events contributed nearly USD 100 billion of loss, with only 17 percent insured.
Highlights of Recent Initiatives
Various initiatives in the region continue to provide education and platforms for disaster risk financing. Developments at the local and regional level generally focus on:
- access to liquidity post-event (1) and rapid deployment of funds;
- insurance for publically-owned assets; and
- insurance for privately-held assets.
In cooperation with the World Bank, the nations of Myanmar, Cambodia and Lao Peoples Democratic Republic are in the early phases of exploring sub-regional pooling of risk. While this initiative remains only a pilot program, a larger, region-wide facility for smaller Asian countries would reduce reliance on government budgets, provide costs savings through diversification and streamline assess to international (re)insurance markets. Larger Asian countries with higher gross domestic products may benefit from their own national pooling programs and bypass the regional fund, but may still leverage the established conduits and knowledge-base of the sub-regional pools.
The Philippines has arranged its second disaster-contingent credit product through the World Bank, of USD 500 million. As part of the Disaster Risk Management Development Policy tied to the loan instrument, the country will evaluate catastrophe risk transfer solutions at the sovereign and provincial levels by third quarter 2018. Ongoing initiatives include the establishment of a local government asset pooling mechanism and a residential pool.
Link to Part II>>
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1. Liquidity post-event refers to funds provided within days or weeks of a disaster occurring. This may take the form of contingent loans or catastrophe pools similar to the Pacific Risk Assessment and Financing Initiative pilot.