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Insurance                                                                                     Insurance


                                                              He stresses the need for disaster and climate risk finance to
                                                            deliver social benefits and safety nets for the Pacific’s most
                                                            vulnerable through, for example, micro-insurance, while
                                                            “really capitalising on the agency of people to deliver and
                                                            support themselves when disasters strike” by giving them a
                                                            measure of control such as cash transfers.
                                                              Lund suggests a mix of micro-insurance and sovereign
                                                            government-level insurance is the most strategic approach for
                                                            Pacific nations. But he says the region should also be looking
                                                            at questions such as what are the barriers to insurance, why
                                                            can’t the Pacific access the right types of reinsurance, can we
                                                            start looking at larger insurance pools across similar commu-
                                                            nities, and is it possible to start highlighting specific demo-
                                                            graphics that should have subsidised insurance?
                                                              In Samoa, Lilomaiava Samuel Ieremia the Assistant CEO Eco-
                                                            nomic Policy and Planning at the Ministry of Finance, told the
                                                            webinar participants that a Disaster Risk Financing Strategy
                                                            is being developed which draws on the lessons of the measles
                                                            epidemic and COVID-19 pandemic, such as the ability to relax
                                                            procurement processes in times of great need. Lilomaiava
                                                            says further work is needed to determine relevant insurance
                                                            products with insurance companies nationally or regionally.
                                                              At a regional level, the Pacific Islands Private Sector Organi-
                                                            sation (PIPSO) told the Forum Economic Ministers in 2019 that
                                                            insurance for asset protection and business interruption to the
                                                            private sector in response to the climate crisis can be expen-
        to efficiently transfer excess risk to international markets. In   sive and inaccessible. “As climatic event severity increases as
        a recent webinar, PCRIC Chief Executive Officer Aholotu Palu   forecast, we will face significant issues in the insurance sec-
        described it as a regional risk pool, “a sovereign instrument   tor, which may require Government intervention to resolve,”
        facility, aiming to serve the immediate financial needs of the   PIFON’s submission to the Ministers states.
        participating countries” after a disaster.            Just before the pandemic and writing for the Center for
         “The reality is that insurance does not solve all the disaster   Global Development, Vijaya Ramachandran and Junaid Sadiq
        risk management finance needs and really is only sensible   Masood asked, “Are the Pacific Islands Insurable?” They
        financially for low frequency, high impact events,” he said.   raised the need for transparency about the cost of insurance
        “Disaster risk finance requires a layered and coordinated ap-  contracts and related exposure to disasters, anticipate that
        proach starting with a country’s contingency savings, the use   donors would need to subsidise premium payments in the
        of concessional loan facilities [such as those made available   same way they currently subsidise payouts post disaster, and
        through international financial institutions] and also national   suggest consideration be given to “linking premiums to the
        disaster insurance.”                                degree of resilience preparedness.”
         John Plevin, a Financial Sector Specialist working with the   Finally, they believe an overarching body, such as the Pacific
        Crisis and Disaster Risk Finance global team at the World Bank   Islands Forum, should “keep track of overall levels of indebt-
        told the same webinar: “With the right partnerships you can   edness and encourage all actors to minimize duplication and
        develop insurance markets that allow households, that allow   administrative costs.”
        businesses, to become resilient financially to natural disas-  “There may be political economy considerations for both
        ters.” He said while support and facilities are in place, Pacific   PICs and donors to go the private insurance route (rather than
        Island governments need to articulate what they need. “Is it   the direct payout route) but these need to be explicit and
        coverage for new risks from insurance, new products entirely,   carefully costed. This is especially the case if public funds are
        or is it just greater technical support and information,” he   being directed to private companies and/or used to subsidise
        asked.                                              private insurers or their clients,” they write.
         Daniel Lund, Special Advisor on Climate Change with the   Managing the level of indebtedness, when COVID-19 has ex-
        Ministry of Economy in Fiji said while Pacific countries have   acerbated concerns over the debt burden, remains one of the
        been setting up forms of national reserve funds to respond to   biggest issues in planning for climate finance, and insurance
        disasters, “these reserve funds have had different challenges.   responses for our governments, and the longer the coronavi-
        In some cases, funds are set up, but they’re not necessarily   rus crisis continues, the more intractable those challenges will
        topped up consistently, meaning that there’s not necessar-  become.
        ily enough liquidity for national reserve funds to always be a
        legitimate way to respond to events.”               editor@islandsbusiness.com

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