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ABAC supports greater private sector role in hydrometeorological risk financing and insurance

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On June 20, APEC Business Advisory Council (ABAC) Philippines hosted a Virtual Roundtable, co-organized by ABAC and the Asia-Pacific Financial Forum (APFF) on Expanding the Private Sector’s Role in Hydrometeorological Risk (HMR) Financing and Insurance.

The webinar is aimed at developing innovative solutions and support measures drawing from industry expertise in collaboration with the public sector and international organizations. As a priority issue of the APEC Finance Ministers for 2024, ABAC Finance Task Force seeks to develop recommendations on how APEC can facilitate greater private sector contributions to HMR financing and insurance in the region.

Hydrometeorological hazards such as typhoons and hurricanes, tornados, heavy snowfall, floods, droughts, heat waves and cold spells are now growing as a result of climate change. Stronger and more frequent natural disasters are destroying homes and businesses at alarming rates and putting entire food systems at risk. Studies indicate that the impact of climate-induced hazards is likely to increase from about 2 percent of global GDP today to more than 4 percent in 2050. [1]

In her welcome remarks, Priority Lead Joanne de Asis Benitez of ABAC Philippines said, “Facilitating the participation of the private sector in developing an enabling market for risk financing and insurance is critical in addressing the significant and growing protection gaps, especially in developing economies from hydrometeorological hazards that are exacerbated by climate change.”

The first session, moderated by Masaaki Nagamura, Sherpa of the APFF Disaster Risk Financing and Insurance (DRFI) Network and Fellow at Tokio Marine Holdings looked at the general framework for HMR management. Timothy Bishop, Senior Analyst for Capital Markets and Financial Institutions at OECD presented on the role and design of catastrophe risk insurance programs for HMRs. Maryam Golnaraghi, Director of Climate Change and Environment at The Geneva Association talked about building flood resilience and the insurability of flood risks in a changing climate.

The second session, moderated by Claudia Thyne, Director for Strategic Market Development at AXA XL and Member of Operating Committee Leadership at the Insurance Development Forum delved into the lessons from engaging the private sector in HMR financing and insurance. Michael Roth, Public Sector Lead for Capital Partners at Munich Re discussed parametric insurance and how it work for hydrometeorological risk transfer. Annette Detken, Head of Global Shield Solutions Platform at the Frankfurt School of Finance & Management shared different platforms offering innovative solutions for climate and disaster risk finance and insurance. Karina Whalley, Head of Public Sector at AXA Climate cited specific examples from actual public-private partnerships, and those under development in the region.

For ABAC Sustainability Working Group Priority Lead Guillermo Luz of ABAC Philippines, “There are lessons we can draw from which governments can turn into more proactive policies. We can’t over emphasize the crucial role the private sector has and the partnership with government can help in this situation.” To further the discussion, ABAC Philippines will host another Public-Private Dialogue on Disaster Resilience as part of ABAC’s work on Enhancing Natural Disaster Risk Preparedness and Building a Robust Infrastructure.

In closing, APFF Coordinator Julius Caesar ParreƱas identified key takeaways for possible ABAC recommendations to APEC Leaders later this year, particularly for the Finance Ministers:

  1. A strong risk reduction and risk prevention strategy is important for making insurance affordable and available.
  2. A large part of knowledge and expertise in the insurance industry can be tapped by layers of government in order to develop strong hydrometeorological risk management financing systems and solutions.
  3. It is important to understand the importance of a systematic sustained coherent approach to financial protection.
  4. Strong ownership by the public sector is important, especially the commitment to coordinate continuity and the implementation of the programs.
  5. Leverage APEC as a platform, especially for peer learning in terms of understanding new financing solutions, standards and principles, and how to make use and benefit from existing programs.

[1] This is a result not only of growing frequency of events, but also of the transformation of hazards from individual catastrophic events to more complex interactions between the global climate and interconnected human systems with cascading and regressive effects that are disproportionately impacting the most vulnerable parts of society and less developed economies. McKinsey & Co: Climate change and P&C insurance: The threat and opportunity (November 19, 2020), https://www.mckinsey.com/industries/financial-services/our-insights/climate-change-and-p-and-c-insurance-the-threat-and-opportunity.

ABAC 2024, ABAC PH, Disaster Resilience