Philippines

Comprehensive Financial Protection In The Philippines: Building a resilient future

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$3.5 BILLION IN ANNUAL LOSSES

The Philippines is located in the Pacific Ring of Fire, and about 74% of its population is vulnerable to natural disasters, including typhoons and earthquakes. In 2013, Typhoon Haiyan, the deadliest Philippine typhoon on record and the strongest in terms of wind speed, killed 6,340 people.
Disasters like Haiyan have serious short- and long-term economic and fiscal impacts , with average annual asset losses that can be upwards of $3.5 billion. Over the past 20 years, economic losses to the agriculture and infrastructure sectors reached $500 million, equivalent to 0.5% of the country’s GDP.

Losses caused by two typhoons in 2009 amounted to $4.4 billion, about 2.7% of GDP.

After Typhoon Haiyan, the ramifications of these losses ran deeper. Faced with an estimated $12.9 billion in damage and losses, national economic activity slowed by nearly a full percentage point in 2013, and another 0.3% in 2014. As a result, around 2.3 million people were pushed into poverty. A probable M7.2 earthquake on the West Valley Fault is projected to have even greater impacts – 37,000 fatalities in the Greater Metro Manila area, and $48 billion in economic losses.

AT A GLANCE

Recognizing the high economic and fiscal risks associated with these vulnerabilities, the Philippine government has devoted considerable effort over the years to increasing its physical and financial resilience:

  • Since 2009, the Philippines has worked with the Global Facility for Disaster Reduction and Recovery (GFDRR) and the World Bank, and other development partners to improve risk-informed development planning and risk reduction interventions.

  • Over time, the government has enabled these actions with policy reforms, including a disaster risk financing strategy to help reduce the financial cost of disasters at all levels:

    • National level: Sovereign risk transfer and contingent credit mechanisms protect the government’s fiscal balance

    • Subnational level: A risk insurance scheme provides local governments with emergency liquidity, private property catastrophe risk insurance for homeowners and small- and medium-size businesses

    • Local level: Immediate emergency funds protect the most poor and vulnerable

  • To further strengthen the financial protection system, the Philippine government entered a first-of-its-kind reinsurance arrangement intermediated by the World Bank in July 2017.

Under this new program, the government-owned insurance agency, Government Service Insurance System, will provide $206 million in aggregate coverage to the national government and 25 participating provinces.