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Philippines

The Enabling Environment for Disaster Risk Financing in the Philippines: Country Diagnostic Assessment (December 2024)

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Executive Summary

The Philippines faces numerous natural hazards that lead to disasters yearly and result in significant financial losses. In addition, the coronavirus disease (COVID-19) pandemic has had a long-lasting severe impact on the economy through medical costs, lockdowns that reduced productivity and created unemployment, and trade and supply chain interruptions that tested financing capacity.

This country diagnostics assessment focuses on disaster risk financing (DRF) and the enabling environment in the Philippines to better understand how the country can improve disaster response. The report efficiently and effectively uses existing financing instruments and introduces additional instruments to enhance the country’s financial resilience to disasters, epidemics, and pandemics. The assessment covers risk retention and risk transfer instruments in insurance, reinsurance, and capital market.

An Asian Development Bank–World Bank methodology is applied to assess possible impediments to the effective functioning of self-insurance or risk retention financing instruments of the government. This methodology has been adapted to include pandemic and epidemic risk. The disaster risk retention instrument insights gained from the questionnaire responses are complemented by analyzing existing publicly available information, carrying out discussions with national and local government agencies, and exploiting international best practices.

The modified version of the W&W Development Framework is used to accommodate international good practice and public and private sector stakeholders’ inputs. This allows insight into existing or perceived demand and supply barriers restricting the development of an enabling environment for disaster risk transfer instruments. Six areas relevant to the development of insurance and capital market solutions for DRF are reviewed within this framework. These include government policies; social protection policies; unlicensed competition; economic conditions; the credibility of the insurance, reinsurance, and capital market providers; and product appeal.

A risked-layered structure is proposed to stimulate, develop, and implement financially sustainable and scalable DRF strategies and solutions. The assessment makes recommendations to enhance the enabling environment for public sector DRF instruments, insurance, reinsurance, and capital markets solutions. The list of recommendations are presented as follows.

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