With an average of $3.5-billion (about P204 billion) asset losses inflicted by a string of strong typhoons and earthquakes to the Philippine economy each year, the World Bank enjoins tapping disaster-risk finance, especially private-sector insurance, to boost preparedness.
In an Oct. 31 report titled "Rising to the Challenge: Success Stories and Strategies for Achieving Climate Adaptation and Resilience," the Washington-based multilateral lender noted that the Philippines is "highly disaster-prone," with three-fifths of total land area plus nearly three-fourths of Filipinos exposed to many hazards caused by Mother Nature.
These frequent, and some rare, natural calamities that cripple the country include earthquakes, floods, landslides, storm surges, tsunamis, typhoons as well as volcanic eruptions.
"Over the past 30 years, disasters have claimed the lives of 33,000 people and adversely affected 120 million people" across the nation, the World Bank said, adding that direct losses to both public and private assets yearly reach more than one percent of gross domestic product (GDP).
"Climate change is expected to increase the frequency and severity of hydromet [hydrological and meteorological] events, with recent estimates from climate modeling exercises showing that emergency response costs from typhoons could rise by over 50 percent for severe events" here in the Philippines, the World Bank warned.
Another concern is that Metro Manila, the country's most densely populated region, bears the biggest disaster-related risk.
Facing these challenges, the World Bank said the Philippines managed to enhance its comprehensive approach to financial preparedness, especially for typhoons and their ensuing flooding and landslides, under the Disaster Risk Reduction and Management (DRRM) Act of 2010.
Specifically, the lender commended the country's disaster risk finance and insurance (DRFI) strategy established in 2015, which "ensures sound fiscal health at national government level, improves financial resilience at local government level, and protects financial preparedness at individual level."
It cited that this DRFI strategy backed by a catastrophe-risk model jointly developed by the Department of Finance (DOF) and the World Bank came in the aftermath of super-typhoon "Yolanda" (international name: Haiyan) that flattened central Philippines in 2013.
Under the Philippines' DRFI strategy, "the government has put in place contingent financing, from the World Bank and other partners, to provide immediate liquidity to help the government manage the financial impacts of disasters, and secured over $14 billion in risk transfer protection to improve fiscal resilience, including through a catastrophe bond, a parametric insurance program for local government units, and the 2024 National Indemnity Insurance Program (NIIP), which protects more than 130,000 schools," the World Bank noted.
Also, the country had "instituted local disaster risk reduction and management funds, requiring local governments to set aside no less than five percent of their estimated revenues from regular sources, and established a parametric insurance program to transfer typhoon and earthquake risk away from the country to the international reinsurance market in local currency," it added.
As such, the government is able to mobilize the private sector via insurance, improve public fiscal resilience, protect more of the most vulnerable and poorest households, as well as increase farmers' insurance penetration, according to the World Bank.
Based on the Philippine experience, the World Bank said "implementing a comprehensive risk-layering strategy takes time; strong ownership is crucial for continuity; and engaging the private sector ensures DRFI instruments protect more people."
For the World Bank, the country's DRFI strategy is among "the most comprehensive financial preparedness reform programs among emerging economies."
"Adaptive social protection is an efficient tool for protecting poor populations and providing insurance-like services to people without access to market insurance. Innovative systems in Ethiopia, Kenya, and the Philippines, which can be replicated in other countries, can achieve benefit-cost ratios larger than five and reduce well-being losses due to disasters by tens of billions of dollars each year," the World Bank said.