09 September 2016
Insurance sector help sought to address loss and damage from climate change
Secretary Emmanuel De Guzman of the Climate Change Commission (CCC) has urged the country's non-life insurance sector to come up with strategies that would help manage loss and damage associated with the adverse effects of climate change.
Speaking at a forum hosted by the Philippine Insurers and Reinsurers Association (PIRA) in Taguig City on Wednesday, De Guzman said the insurance industry should embrace the concept of climate change and contribute to addressing loss and damage due to sudden weather disasters and slow-onset events, which the country endured in recent years.
The Philippines, considered one of the nations most vulnerable to climate change, sustains annual losses from the impact of hydrometeorological hazards. Super typhoons like Yolanda (Haiyan) and other extreme weather events claim thousands of lives yearly and cost the country billions of pesos that derail years of socio-economic development.
De Guzman said non-life insurers are in the best position to devise a system that would allow citizens to prepare for financial challenges that follow every climate-induced natural disaster.
“I am confident you will be able to come up with innovative strategies to provide our people with the means to prepare themselves adequately for emergencies and crises that could happen in this era of climate change," De Guzman told PIRA members, who are experts on loss and damage.
The PIRA forum was a side event of the United Nations Framework Convention on Climate Change 2016 Forum of the Standing Committee on Finance (SCF) hosted by the CCC and the Asian Development Bank held at the ADB Headquarters in Pasig City earlier this week.
By doing its fair share in addressing residual losses and damages, De Guzman said the insurance industry would help unburden the government, which usually has inadequate funding arrangement in place for major disaster events.
Citing a World Bank report, De Guzman noted that the Philippine government retains most of its disaster risk because it relies heavily on annual contingency budget allocation for potential disaster events and post-disaster reallocations to finance its response efforts.
One example, he said, is the National Disaster Risk Reduction and Management Fund, which was established under Republic Act No. 10121 to address urgent needs arising from natural calamities and emergencies. The fund has an allocation of P38.9 billion in the 2016 General Appropriations Act.
“As experience has painfully taught us, this is not enough to help our citizens get back on their feet. The government can step in and reconstruct roads, bridges, and other damaged infrastructure, or offer assistance through the mechanisms of DSWD, Pag-IBIG, SSS, GSIS and other agencies, but it cannot on its own, reconstruct lives,” De Guzman pointed out.
De Guzman said the CCC is most willing to collaborate with the insurance industry in undertaking a baseline policy study on risk, transfer, finance and insurance in the country that will examine gaps and propose solutions, including policy reforms.
“Our National Panel of Technical Experts, comprised of eminent experts in climate change-related disciplines, has begun work on this and your participation in the study is key to defining where we are right now, where we should be heading and how we could get there,” De Guzman said.
He said the CCC and the insurance industry also need to work on getting more local government units (LGUs) to deploy weather-indexed insurance initiatives.
“Yes, the government must establish the policy lead, but there is also the political matter of coming up with a winning strategy that pilots more and more LGUs that are not only aware of, but also wanting to deploy weather insurance and other related initiatives, using what is already available and accessible,” the CCC vice chair and executive director said.
He cited in particular the People’s Survival Fund (PSF), which finances adaptation measures at the local community level.
The CCC official said that establishing LGU ownership is key to letting PSF grants bring about broader development of risk transfer instruments and risk financing mechanisms in a way that places financial sustainability at its core.
“In other words, a long-term coverage should be in place that, when it reaches a point where it could already sustain on its own, it would no longer require the assistance of the PSF,” he added.
De Guzman also challenged the insurance industry to work on slow-onset impacts of climate change, which, he said, “many believe to be uninsurable.”
Examples of slow-onset events are sea level rise, increasing temperatures, ocean acidification, salinization, land and forest degradation, loss of biodiversity and desertification.
“The amount of tools, data, expertise and experience you have is virtually unparalleled in the world, and I think your sector needs to start thinking far beyond and outside the box in confronting a threat that is bigger than what we could imagine,” De Guzman told non-life insurers.
“We cannot simply assume that loss and damage is uninsurable. Loss and damage is your work, your bread and butter so to speak, a matter much discussed and even defined in climate talks,” he added.
According to De Guzman, the discussion on loss and damage is linked to the goal of limiting global warming to 1.5 degrees centigrade above pre-industrial averages, which the Philippines, as leader of the Climate Vulnerable Forum, fought hard and won in the Paris Agreement.
“Despite resistance from the developed countries, we stood our ground because we knew our threshold to survive and thrive. We know that beyond 1.5C, we will have unacceptable losses and irreparable damages. What was previously a romantic and elusive goal is now the benchmark of global climate ambition and action,” De Guzman said.
Reference: Asec. Romell Antonio Cuenca / Tel. No. (02) 735 3069