What if insurance companies got involved in disaster risk reduction?
Odd, yes, but that’s precisely what’s being floated in the Philippines to equip local governments and households with capital to minimize damage and losses caused by Typhoon Haiyan, with the full support of U.N. agencies and top players in the global insurance industry.
The U.N. Office for Disaster Risk Reduction, together with multinational insurance corporations Willis Group and Munich Re, has developed a new “catastrophe insurance scheme” that hopes to be a proactive — rather than reactive — solution for quick disaster response and stable recovery and rehabilitation for local government units and households in the country.
Such a scheme would address the enormous damage caused by Haiyan, which killed over 6,000 people and destroyed over 36 billion pesos ($813 million) in property in a country that normally experiences about 20 typhoons each year during the rainy season.
“What is needed is a simple scheme which will provide valuable protection to people and municipalities before the next typhoon season,” noted UNISDR head Margareta Wahlström, adding that local governments will play a key role in this effort as the first responder in a disaster.
The scheme will be different from usual insurance policies, as the payment will be on a predetermined amount when a specific calamity threshold — or “trigger” — is met instead of actual losses, according to the private insurance firms who developed the framework. This means that when a certain amount of rainfall or wind strength, for instance, reaches the “trigger” point based on either actual results or scientific projection, an insurance payment will automatically be given.
It will be interesting to see how the scheme will be laid out and implemented once it gets government approval in the Philippines, notorious for corruption and embezzlement of public funds which don’t escape even the worst of calamities like the latest typhoon.
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