The Case of PIRA and National Re (Philippines)
by Mr. Augusto Hidalgo - Trustee, PIRA Insurance Industry Association, and CEO, National Reinsurance Corporation of the Philippines.
How can we establish more open stakeholder relationships in developing
nations on the topic of disaster risk reduction, and how can insurance be of
help? Indeed, insurers can influence actors to be more conscious of disaster risk
and, consequently, manage and potentially transfer disaster risk effectively. It is
important, in this context, to understand the underlying perceptions surrounding
We have talked about how the world is underinsured, but perhaps we can take
a different perspective by rephrasing this problem and stating that the world is
largely self-insured. Some of the discussions around insurance, data, analytics,
engagement and participation ought to address—certainly in the Philippine
case—the awareness of what it costs to hold risk.
As you may know, in the developing world, underwriting and analytics are not well
established. Many of the solutions that emerge from forums such as this one are
not particularly applicable to local capacity in developing nations. For that reason,
discussions with community actors in countries like the Philippines focus perhaps
on analytics for risk management rather than analytics for risk transfer.
The insurance community should talk to stakeholders—regulators, policymakers,
consumers—perhaps in simpler terms, and ask: how much does it cost to hold risk
personally, to be essentially self-insured? This could be governments, or families
who have just moved above the poverty line.
Disaster risk reduction (DRR) finance is complicated for many actors in the
Philippines. It involves a myriad of public and private entities, at the international
level (aid, appeals and contingency finance) and national level (stand-alone
DDR and national funds, sub-national actors and service providers), financial
institutions (sovereign and catastrophe bonds, private loans), development
financial institutions (public–private partnerships, microinsurance, emergency
recovery loans), remittances and foreign direct investment. The Philippines
catastrophe pool is only one aspect of DRR finance, in the form of a public–private
Engaging with the different stakeholders as an insurance trade body and bringing
the data that is accessible to us to the table is an intricate matter. Indeed, talking
about quantifying earthquake and typhoon risk, and generating a statement
about what that might cost and how to transfer the risk, is a far less comfortable
conversation for us to have with policymakers, legislators and regulators than
simple tax reduction, because tax reduction is something they know. It’s a different
kind of risk. The challenges we face with community actors have to do with the
fact that stakeholders usually operate in silos and are generally not aware of risk
It is also important to understand—particularly when considering the response
time to a disaster and mobilisation in the wake of an event—the nature of the
interactions between the development agencies involved in DRR and policymakers
or the private sector. To do so we must consider the perspective of the community
actors: consumers, suppliers and regulators/policymakers.
With regard to consumers in developing nations, lower-income consumers, in
particular, culture is as important as strategy. Buyers tend to be more fatalistic
and less proactive in reducing disaster risk, leading them often to rebuild in the
same at-risk locations as before. This requires a specific form of communication.
Policymakers with less know-how are perhaps less confident to spearhead risk
transfer solutions, and favour emergency response solutions that are more
expensive because they understand them better. Again, this requires a particular
form of interaction.
There are several ways insurers can help. Firstly, they can assume a thought leader
role, engaging in joint research with stakeholders. Secondly they can take on a
more active underwriting role, developing a turnkey cat pool solution for the
government (which is currently on the table in the Philippines). And thirdly, they
can advocate regulators to add “risk-informed” investments in insurer investment
Boracay, Philippines, November 2013: building lies in ruins following Super Typhoon Haiyan.
This article was first published in The Geneva Association’s conference review, “Insurance as contributors
to problem solving and impact reduction” from Sendai, Japan in March 2015.