Building resilience in Asia: insurance initiatives across the region

The Insurer examines some of the initiatives implemented across the Asia Pacific region to improve access to insurance against natural catastrophes.

Given the scale of the protection gap across Asia, the region is the focus of several initiatives aimed at improving access to insurance and building resilience to catastrophic events.

These initiatives include a range of approaches, including multi-country risk-pooling facilities, other public-private partnerships and parametric-based covers, as well as microinsurance 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 serving as lead technical partner.

The facility provides insurance solutions through SEADRIF Insurance Company, which was incorporated in Singapore in 2019.

Like other multi-country risk-pooling facilities, SEADRIF provides cover for governments in the region and serves as a platform for rapid payouts in the aftermath of a loss event.

In August this year, the facility made two payouts totalling $1.5mn 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, designed to address the basis risk where losses are incurred but parametric triggers have not been met.

SEADRIF is one of several sovereign risk pools operating across the world. Earlier this month the facility signed an agreement to deepen collaboration with three other multi-country pools – African Risk Capacity, CCRIF SPC and the Pacific Catastrophe Risk Insurance Company – which included discussions around the creation of a joint reinsurance facility.

The cost of reinsurance remains one of the major challenges for sovereign risk pools, and during a recent Gallagher Re-convened London meeting they confirmed a shared interest in exploring with donors and development partners the creation of a joint facility that would promote more efficient use of capital and better facilitate global risk transfer to reinsurance and capital markets. This would further enable the risk pools to scale up their offerings.

Discussions have also taken place over the creation of an additional sovereign risk pool to serve Central Asia, led by the Asian Development Bank. A working paper providing a roadmap for the development of a facility was published in July this year. WTW has been working with the Central Asia Regional Economic Cooperation Program to develop a framework for a risk pool in the region.

Localised projects

Across the Asia Pacific region, several more localised initiatives are taking place in order to increase the resilience of communities and businesses within the region.

In South Asia, WTW launched a four-peril parametric insurance product in July this year to unlock financing for aquaculture development in Sri Lanka, designed and placed by the broker on behalf of Taprobane Seafood Group, the country’s largest seafood company.

The broker has also been working with charity Rare, with financial support from the UK’s Blue Planet Fund and the government of Canada via the Ocean Risk and Resilience Action Alliance, to pilot a parametric insurance solution for fishers in the Philippines to combat income losses from prolonged periods of adverse weather which prevent safe fishing.

Simon Young, WTW’s senior director for disaster risk finance and parametrics, told The Insurer it is hoped a pilot will launch in 2024. “We have been developing similar programs in Indonesia, several Pacific islands and in the Caribbean,” he said.

Earlier this month microinsurance consortium Blue Marble launched a pilot insurance program to protect smallholder coffee farmers in Indonesia from the impact of changing weather patterns.

The pilot is in collaboration with Nestlé and covers more than 80 smallholder farmers that 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 policies, with approximately 155,000 farmers and micro-enterprises receiving insurance payouts exceeding $900,000.

Alongside the development of these initiatives, several projects are underway to build risk education across the region.

Perhaps the most high profile of these is the Global Risk Modelling Alliance (GRMA), initially 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 to enable them to make more informed decisions around resilience and disaster risk reduction measures.

Pakistan was selected as the first partner country for the initiative, which will support Pakistan’s development of its first national adaptation plan and long-term climate strategy.

Initiatives such as these can play a critical role in the development of resilient and informed communities across the region.