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Philippines Launches Innovative Insurance Program to Boost Natural Disaster Risk Management

Washington, DC, August 15, 2017 – A new catastrophe risk insurance program to help the Philippines better respond to losses from climate and disaster risks was launched by the Government of the Philippines, supported by the World Bank (IBRD, International Bank for Reconstruction and Development) and the U.K. Department for International Development.

The program provides the Philippine peso equivalent of US$206 million in coverage against losses from major typhoons and earthquakes to national government assets, and to 25 participating provinces against losses from major typhoons. Insurance payouts are made when pre-defined parametric triggers are met.

The Philippines is among the world’s most vulnerable countries to natural disasters.  The country is expected to incur, on average, US$3.5 billion in asset losses each year due to typhoons and earthquakes.

Financial shocks caused by natural disasters undermine economic growth and poverty reduction,” said Joaquim Levy, Managing Director and Chief Financial Officer of the World Bank Group. “This new insurance program illustrates how the World Bank Group can leverage capital from the market to help governments receive fast cash injections for emergency response and to sustain essential services in times of crisis, empowering local governments to more effectively assist their citizens.”

“This initiative is a major advancement in the Philippines’ efforts to bolster its resilience,” said Mara Warwick, World Bank Country Director for the Philippines. “It demonstrates the global leadership of the country in developing innovative financial solutions to mitigate the financial impacts of extreme climate and weather related events, as well as major earthquakes.”

The program is the first of its kind in the Philippines and builds on six years of intensive partnership with the World Bank, including the preparation of the first catastrophe risk model for the country and the adoption of a Disaster Risk Finance Strategy by the Department of Finance.  This is the first time that the World Bank has entered into a reinsurance agreement with a governmental agency, and the first time it is executing a catastrophe risk transaction in local currency.

This new insurance program will support the country in responding to impacts of severe natural disasters. It acts as the last line of defense, complementing other funding sources such as the national and local disaster risk reduction management funds and contingent credit that protect against less severe natural disasters. Since 2009, the World Bank has issued, hedged, or facilitated over US$2.5 billion in transactions to transfer earthquake, wind, drought-related and pandemic risks from its borrowing member countries to the capital markets.

Since 2009, the World Bank has issued, hedged, or facilitated over US$2.5 billion in transactions to transfer earthquake, wind, drought-related and pandemic risks from its borrowing member countries to the capital markets.

About the World Bank

The World Bank (International Bank for Reconstruction and Development, IBRD), rated Aaa/AAA (Moody’s/S&P), is an international organization created in 1944 and the original member of the World Bank Group. It operates as a global development cooperative owned by 189 nations. It provides its members with financing, expertise and coordination services so they can achieve equitable and sustainable economic growth in their national economies and find effective solutions to pressing regional and global economic and environmental problems.

The World Bank has two main goals: to end extreme poverty and promote shared prosperity. It seeks to achieve them primarily by providing loans, risk management products, and expertise on development-related disciplines to its borrowing member government clients in middle-income countries and other creditworthy countries, and by coordinating responses to regional and global challenges. It has been issuing sustainable development bonds in the international capital markets for 70 years to fund its activities that achieve a positive impact.

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