Risk insurance to unlock P2.3B for ‘Tisoy’ victims

A Tisoy-ravaged part of Masbate province. (Plan International Philippines)

An innovative risk insurance the government availed of could unlock at least P2.3 billion in partial payouts for provinces hit hard by Typhoon “Tisoy” without the hassles of time-consuming field verification by insurance adjusters.

Bicol, the region most ravaged by the typhoon that made a landfall in Gubat, Sorsogon on 2 December, can get an immediate P740 million partial payout.

The amount is equivalent to 40 percent of Bicol’s assessed damage. The payout may reach P1.9 billion on a “full trigger” basis.

“It took all of 10 days for the calculation of the insurance company to reach the trigger for partial payout of P16 for Albay. The insurace company will pay the funds to the National Treasury, which in turn would release the funds to the covered provinces,” said Albay Rep. Joey Salceda, House Ways and Means Committee chair.

A coverage trigger is the event that must occur before a particular liability policy applies to a given loss. Under an occurrence policy, the damage brought by Tisoy is the trigger and liability will be covered under that policy if the injury or damage occurred during the policy period.

Salceda said the payout provides immediate funding for rehabilitation, which avoids the liquidity trap suffered by many communities waiting for the long processing to be completed, allowing the devastation to further deteriorate.

Salceda’s home province is “triggered” to get P163.27 million partial payout from the Parametric Risk Insurance coverage, which could reach P408.17 million on a full trigger.

Sorsogon could receive from P163.43 million partial to P408.57 million full trigger; Camarines Sur P163.43 million to P408.57 million; Catanduanes P81.82 million to P204.56 million, and; Camarines Norte P164.02 million to P410.04 million.

Eleven other provinces covered by the risk insurance could get a total of P3 billion partial payout under the scheme.

This risk transfer mechanism was initiated by the Department of Finance (DOF) after several attempts by previous administrations failed due to the hesitation by local government units to contribute to the premium.

Salceda said Albay actually worked with the World Bank and the DOF, but the premium would be higher outside of a group insurance. Others had balked at paying the premium.

The Duterte administration finally implemented it for the first time this year by shouldering the entire insurance premium, which Salceda said may be considered a milestone for resiliency as the insurance provides risk-based transfers at a shorter period, thus preventing the liquidity gaps wherein better recovery opportunities could be lost due to lapse of time.

The assets covered by the insurance include residential, commercial and industrial buildings, as well as government assets. Compared to prior typhoons, Tisoy was most devastating as it caused storms surges that destroyed homes in coastal villages.

The insurance premium was paid for by the National Government with P2 billion budgeted in 2019, and sourced from the P20 billion National Disaster Risk Reduction Management Fund, with no share or contribution from the beneficiaries.

The coverage target includes the top 25 provinces in the country’s eastern seaboard, based on their disaster risks and vulnerability assessment.

The government took out Parametric Insurance for a total coverage of P20.5 billion split between typhoons for a total of P18.4 billion. and earthquake for P2.1 billion.

Of the coverage, the Philippines was already paid out some P848 million following an earthquake in the past months which reached the minimum threshold, said Salceda.

Camarines Sur also sustained damage, like this public school in Buhi. (Plan International Philippines)

The agreement provides that the payout should be used for post-disaster activities relating to government infrastructures and facilities such as repair or reconstruction of transport infrastructures; flood control, drainage and water facilities; hospitals and their damaged equipment, schools, evacuation centers, government buildings; rehabilitation of irrigation, other agricultural infrastructure, and public markets; restoration of utilities and network infrastructure; provision for Temporary Learning Spaces; and related expenses consequential to them, such as debris clearing, removal, clean-up, demolition, among others.