Pacific Disaster Risk Financing and Insurance Program
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Pacific Disaster Risk Financing and Insurance Program PACIFIC CATASTROPHE RISK INSURANCE PILOT (PCRIP) COUNTRY CONSULTATION REPORT Prepared by Savenaca Narube Suva, Fiji, 2015 PCRIP Consultation Report © Secretariat of the Pacific Community (SPC) 2015 All rights for commercial/for profit reproduction or translation, in any form, reserved. SPC authorises the partial reproduction or translation of this material for scientific, educational or research purposes, provided that SPC and the source document are properly acknowledged. Permission to reproduce the document and/or translate in whole, in any form, whether for commercial/for profit or non-profit purposes, must be requested in writing. Original SPC artwork may not be altered or separately published without permission. Original text: English Secretariat of the Pacific Community cataloguing-in-publication data Narube, Savenaca Pacific Disaster Risk Financing and Insurance Program: Pacific Catastrophe Risk Insurance Pilot (PCRIP) – Country Consultation Report / prepared by Savenaca Narube 1. Risk management — Oceania. 2. Disasters — Oceania. 3. Environment — Oceania. 4. Risk management — Oceania. I. Narube, Savenaca II. Title III. Secretariat of the Pacific Community 577.22 AACR2 ISBN: 978-982-00-0920-2 ii PCRIP Consultation Report Contents Abbreviations ................................................................................................................................... iv Acknowledgements........................................................................................................................... iv Disclaimer ..........................................................................................................................................v Summary of findings ..........................................................................................................................1 1. Introduction ...................................................................................................................................3 2. Consultations .................................................................................................................................4 2.1 Aim of the consultations ............................................................................................................... 4 2.2 Consultation report ....................................................................................................................... 5 3. Lessons learned from the Pacific Catastrophe Risk Insurance Pilot ...................................................5 3.1 Demand for catastrophe risk insurance is unanimous ................................................................. 5 3.2 A holistic approach to disaster risk financing will facilitate understanding ................................. 6 3.3 Building country ownership is an ongoing effort .......................................................................... 6 3.4 Capacity building is an ongoing challenge .................................................................................... 8 3.5 Increasing the pool of risks to remain a medium-term goal......................................................... 8 3.6 Sustainability critically depends on the affordability of premiums. ............................................. 9 3.7 Mobilisation of donor support to be collectively promoted ...................................................... 10 3.8 Coverage should be revisited and embedded ............................................................................ 10 3.9 Regional approach to catastrophe insurance and climate change ............................................. 11 3.10 The strategic importance of a mechanism to cover mid-level disasters is high ......................... 12 3.11 Attachment and exhaustion points to be clarified ..................................................................... 12 3.12 Review of the loss estimation model is warranted ..................................................................... 12 4. Options for the future of the PCRIP at the end of the third season ................................................. 14 5. Risks to sustainability ................................................................................................................... 14 6.Views on the proposed financial products of the DRFI .................................................................... 15 6.1 Support for a mutual insurance fund .......................................................................................... 15 6.2 Search for a cost-effective mechanism ....................................................................................... 15 6.3 Support for capacity building under the DRFI ............................................................................. 16 7. The structure of the management entity for the PCRIP .................................................................. 16 7.1 In-principle support for the separate management entity, but roles to be clearly defined ...... 17 7.2 Costs of management entity must be shared ............................................................................. 17 7.3 Link the decision on the management entity to the pilot program ........................................... 18 7.4 World Bank to continue to intermediate the scheme ................................................................ 18 7.5 Options for the structure of the management entity ................................................................. 19 7.6 Full feasibility study to be undertaken ....................................................................................... 19 Annex 1: List of people met with during consultations ...................................................................... 20 Annex 2: Bibliography ...................................................................................................................... 22 iii PCRIP Consultation Report Abbreviations ADB: Asian Development Bank CCRIF: Caribbean Catastrophe Risk Insurance Facility DRFI: Pacific Disaster Risk Financing and Insurance Program ETF: Emergency Trust Fund GCF: Green Climate Fund GDP: Gross Domestic Product GFDRR: Global Facility for Disaster Reduction and Recovery FEMM: Pacific Islands Forum Economic Ministers Meeting IDA: International Development Association JICA: Japan International Cooperation Agency MIF: Mutual insurance fund MOF: Ministry of Finance PICs: Pacific Island countries PICTs: Pacific Island countries and territories PIF: Pacific Islands Forum PIFS: Pacific Islands Forum Secretariat PCRAFI: Pacific Catastrophe Risk Assessment and Financing Initiative PCRIP: Pacific Catastrophe Risk Insurance Pilot PREP: Pacific Resilience Program TA: Technical assistance TC: Tropical cyclone TOP: Tongan Pa’anga UNFCCC: United Nations Framework Convention on Climate Change WB: World Bank Acknowledgements The consultant expresses his appreciation to all those that provided their valuable time to meet with him. Appreciation is also extended to the World Bank Group and the Secretariat of the Pacific Community for their assistance and guidance in this assignment. This report was produced with the financial support of the Government of Japan, through the Pacific Disaster Risk Financing and Insurance multi-donor trust fund and the Global Facility for Disaster Recovery and Reconstruction (GFDRR), and the World Bank, and with logistical support from the Secretariat of the Pacific Community (SCP). iv PCRIP Consultation Report Disclaimer This report has been prepared by the consultant, Mr Savenaca Narube, for SPC and the World Bank. The report includes the views and recommendations of the consultant and does not necessarily reflect the views of SPC or the World Bank, or indicate a commitment to a particular policy or action. While reasonable efforts have been made to ensure the accuracy and reliability of the material in this report, SPC and the World Bank cannot guarantee that the information contained in the report is free from errors or omissions. SPC and the World Bank do not accept any liability, contractual or otherwise, for the contents of this report or for any consequences arising from its use. v PCRIP Consultation Report Summary of findings The third season of the Pacific Catastrophe Risk Insurance Pilot (PCRIP) ends in October 2015. In anticipation of the conclusion of the third season of the PCRIP, The World Bank, together with its partner in the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) project, the Secretariat of the Pacific Community, appointed an independent consultant1 to conduct high-level consultations on the establishment of a management entity for the Pacific Disaster Risk Financing and Insurance Program (DRFI). The main aim of the consultation was to seek the views of participating countries on the establishment of a separate entity to manage the PCRIP and the DRFI, taking over the current intermediary role of the WB. However, to put the issue into context, it was necessary to gauge the countries’ demand for catastrophe insurance and their commitment to PCRIP. It was an opportune time to seek feedback on the lessons learned from the PCRIP, to help shape the way forward on future options for the provision of catastrophe insurance. The consultations also solicited preliminary views on the products that are being developed in the DRFI. The major findings of the consultations were as follows: a) The demand for catastrophe insurance is unanimous. Participating