Insurers propose 'earthquake pool' for mid-income households

MANILA, Philippines - The country’s insurance sector is working on an “earthquake pool” to increase protection for middle-income households with between P800,000 to P10 million worth of property.

The proposed Philippine Catastrophe Pool is an insurance pool that would address the financing of reconstruction costs after an earthquake.

“It will be designed to reduce the burden of the government for financial assistance, foreign aid or borrowings,” said Brian L. D’Souza, senior vice president for technical services and reinsurance of Federal Phoenix Assurance Co. during the national convention of the Philippine Insurance and Re-insurance Association (PIRA).

The present practice is that government and the private homeowners basically carry the burden of reconstruction and rebuilding.

D’Souza added that the objectives of establishing a pool is to increase insurance penetration; capacity for catastrophe cover; reduce dependence on government; and improve monitoring/pricing of catastrophe cover.

Insurance Commission deputy commissioner Vida Chiong confirmed that the IC, along with the Department of Finance (DOF), the Philippine National Reinsurance Co. (PhilNaRe) and the Asian Development Bank (ADB) were in serious discussions on the launching of the pool.

Chiong explained that the proponents of the pool prefer to focus on the middle-income segment of society as the high-rise, high-end housing and real estate segment have their own provisioning for protection.

“After typhoon Ondoy, it became imperative that the middle-income residents needed further protection,” she added.

Forming catastrophe-specific pools is a global practice although the Philippines is looking at similar models in Japan, Taiwan and Turkey. It is also in use in France, Spain, Switzerland, Norway and the United States.

These pools ease the burden of having to shoulder huge claims, much like what re-insurance companies actually do.

“It also means claims can easily be processed, the responsibility of protecting and paying out claims will be domestic in nature, and the government will extend its unwavering support,” Chiong said.