THE Philippine Catastrophe Insurance Facility (PCIF) framework will likely price catastrophe risk policies by so-called risk zones, Philippine Insurers and Reinsurers Association (PIRA) Chairman Allan Santos bared on Wednesday.
Speaking at the First Virtual Philippine Insurance Summit—a two-day event of industry updates and discussions on environmental issues, pandemics, innovation and disaster management, Santos said the PCIF technical working group (TWG), in collaboration with the World Bank, is currently in the process of modeling the rates for the catastrophe perils.
In February 2020, the Insurance Commission (IC), PIRA and the National Reinsurance Corp. of the Philippines (Nat Re) signed a memorandum of understanding (MOU) to collaborate on the development of the PCIF.
The PCIF is a private-sector led facility for non-life insurers. Its aim is to redirect the catastrophe risks to the facility that shares the pooled risks with the participating companies.
By doing so, the facility capacitates the insurers to cover catastrophe risks and manage their exposures to catastrophes more effectively.
The target implementation date of the facility is April 2022.
‘Aggressive target’
“THIS is quite an aggressive target date but the technical working group is diligently working toward that target,” Santos said.
“This only applies to the catastrophe. We are looking at typhoons, earthquakes and floods. So at this stage the technical working group, with the help of a few brokers and the World Bank, is modeling the rates for the catastrophe perils,” he added.
The PIRA president said the emerging idea is that the pricing will vary depending on the “risk zone” such as a province to reflect the risks involved in the rates unlike the present practice where rates are uniform for all typhoons or all earthquakes, etc.
Wider public access—Funa
“THE efficient management of catastrophe exposure among our issuers will further result in a more risk appropriate rating environment that would ensure sustainable catastrophe premium rates,” IC Commissioner Dennis Funa said.
“This will provide the public with a wider access to catastrophe insurance protection,” he added.
Earlier this year, international credit watcher Moody’s Investor Service assigned a negative ESG credit impact score for the Philippine economy. ESG stands for environmental, social and governance.
“The Philippines’s overall issuer profile score is highly negative [E-4], given the high incidence of climate-related shocks, including typhoons and extreme precipitation leading to flooding. In addition, the relatively large, albeit declining, share of the labor force employed by the agricultural sector heightens the country’s susceptibility to heat stress given the periodic episodes of drought,” Moody’s earlier said.
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