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ASEAN DISASTER RISK FINANCING

& INSURANCE FORUM

ASEAN DISASTER RISK FINANCING & INSURANCE FORUMSession 3

ASEAN

CountriesPane Stojanovski

Institute for Catastrophe Risk Financing, Nanyang Technological University

Laura Boudreau

Disaster Risk Financing & Insurance, The World Bank

November 8 – 10, 2011

Jakarta, Indonesia




& INSURANCE FORUM

Disclaimer

This report

is

a work

in

progress

presented

for

further

collaborative drafting. The team has made every attempt to

,

interpreted with due consideration to its limitations resulting

from the

fact

that

indirect

sources

have

been

used

where

primary sources were not avai a e, an t at t e co ective

knowledge in this area is limited.

discussion with the ASEAN Member States and other participants during this Forum.




& INSURANCE FORUM

Presentation background & structure

• World Bank

and

ASEAN

Secretariat

background report, Chapter 4 on the state of

private catastrophe risk insurance in ASEAN

Countries;• Preliminary findings from First Draft report;

• Session #4 covers ASEAN markets for:

– Property Catastrophe

Risk

Insurance;

– Agricultural Insurance;

– Disaster Microinsurance.




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ASEAN assets and livelihoods are largely uninsured for

disasters

• Non‐life

insurance

penetration is far below that

markets.

•

Even where

insurance

is

in

,

cover catastrophic perils.

• Penetration for residential

particularly low. Government

assets are also believed to be

lar el uncovered.




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The ASEAN region exhibits low voluntary demand for

property catastrophe risk insurance and limited reach

of

distribution• Distribution is limited by the reach of agents and brokers

– New methods of distribution are emerging but have yet to take off

• Few mechanisms are in place to promote/mandate catastrophe risk

insurance

– Lending institutions are key promoters of catastrophe risk insurance, often

making it a condition of lending for housing finance

– However, countries with low mortgage penetration need to look elsewhere for

mechanisms to

encourage

insurance

uptake

– For example, In Turkey, mandatory catastrophe insurance purchase is enforced

through land and housing registration processes (typically point of sale). Utility

purchase.




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ASEAN regulators and insurers have struggled to keep

pricing at a sustainable level due to excessive

compet t on

‐

fragmented resulting in high

competition.

Prices

have

generally

been

Monopoly Less than 10 10 to 50 More than 50

Philippines

Indonesia

Thailand

Sin a ore

‐

.

• Advisory or mandatory tariffs are in

place in 6 of 10 ASEAN Countries, but

Malaysia

Vietnam

Lao PDR

Brunei Darussalam

Cambodia

these tariffs. Myanmar




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Five ASEAN countries class their regulatory systems as

risk‐based capital regimes

•

Not

all

risk‐

based

supervision

regimes

explicitly

consider

catastrophe risk.

– “ ‐ ”

• Access to catastrophe models is limited; supervisors often lack tools

to monitor

and

control

insurers’

exposure

based

on

quantification

.

– For example, risk expressed as a probable maximum loss as seen in the

European Solvency II Directive

Brunei Darussalam Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Vietnam

AIR Worldwide Earthquake

Earthquake,

Typhoon

In epen ent t ir ‐party pro a i istic catastrop e mo e ven or coverage

EQECAT Earthquake

Earthquake,

Typhoon

Earthquake,

Typhoon Earthquake

Earthquake,

Typhoon

Risk Management Solutions Earthquake Earthquake




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Agriculture, a major sector in most ASEAN countries, is

highly exposed to catastrophe perils

•

Important in

8 ASEAN

Countries

• Livestock, aquaculture, and

forestry are

also

important

• Agriculture is very exposed to

tropical cyclones (typhoons), floods, droughts, tsunamis,

and wildfires

• Climate change will

droughts.




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Agricultural insurance is in very early stages of

development in most ASEAN Countries

AustraliaOther Asia‐

Pacific (7)

2009 Agricultural Insurance Premium by

Country (%

of

Asia

‐Pacific

Total

US$

3.9

billion)

•

Currently available

in

5 ASEAN

Countries

• A ricultural insurance has achieved

ASEAN

Countries (5)

0%India

11%

South Korea

3%very little penetration where available

• Most developed markets, the

Philippines and

Thailand,

have

less

• Livestock insurance is relatively

underdeveloped in ASEAN Countries• Lon histor in Phili ines onl ASEAN

country where

commercially

available

• ASEAN Countries account for 0.1% of total agricultural insurance premiums

China

50%Japan

31%

‐




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A range of new crop insurance products are being

Types of Crop Insurance Product Available in ASEAN Countries in 2011




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Livestock insurance remains limited in ASEAN Countries

Types of Livestock Insurance Product Available in ASEAN Countries in 2011




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Governments are now promoting Public‐Private

Partnerships (PPP)

•

Thailand, Vietnam,

and

Philippines

had public sector crop insurance in

‐

• The Public sector model mostly

unsuccessful internationally,

includin in South East Asia.

• Today, Indonesia, Thailand, and

Vietnam are promoting private

sector cro and livestock insurance

backed by

public

‐sector

subsidies.




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Thailand has a dynamic agricultural insurance market

in 2011 based on a PPP

• Two private

‐sector

weather

index

insurance

schemes

for

rainfall

‐deficit in maize and rice

•

Disaster Relief Top‐up Scheme

– New PPP scheme for national rice crop in 2011

– Underwritten by

a pool

of

Thai

insurers

and

reinsurers,

supported

by

internationa reinsurers

– Bank of Agriculture and Agricultural Cooperatives acts as scheme

distribution and implementing agency

– Perils covered: Flood excess rain drou ht frost t hoon fire and hail for

rice – Government support: 50% premium subsidy (budget THB 4.0 bio, US$ 132

million)

– , rice crop in future (57 million rai, 8 million Ha)




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Disaster microinsurance

is

as

o

yet

undeveloped in ASEAN Countries except for the

P i ippines an In onesia

• In the early stages of Microinsurance experience in ASEAN Countries

eve opment in t e

Philippines and Indonesia.

•

No experience: ‐

Very limited: X

Limited: XX

Moderate: XXX

Strong: XXXX

Very Strong: XXXXX

suggests that disaster

microinsurance development

u

microinsurance sector.




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Community‐based

organizations

play

an

important role in developing microinsurance in

ASEAN

Countries

• Often CBOs directly provide insurance to members, acting as risk carrier.

,

– Common model for credit‐life products

• Domestic and

international

(re)insurers and

brokers

exhibiting

interest

in

eve op ng m cro nsurance mar e .

– International (re)insurers bring technical expertise and risk carrying

capacity that can facilitate disaster microinsurance development




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Large potential market for disaster microinsurance, but low

exhibited demand

•Over

222

million

people

living

on

less

than

US$2

per

day

in

ASEAN

Countries – , ,

Viet Nam, Thailand

•

Natural

disasters

reported

as

a

priority

risk

in

one

of

four

ASEAN

Priority risks of low‐income households in selected ASEAN countries

Various sources summarized in Churchill, 2006.




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Governments are supporting microinsurance

development in ASEAN

• Public‐private

partnerships

are

driving

the

development of disaster microinsurance in the

Philippines and in Indonesia

•

The

Philippines

is

the

first

ASEAN

Country

to

microinsurance regulation – Indonesian Government announced it will issue

microinsurance regulation

in

2012

• International experience suggests that these

microinsurance

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