ADB allocates $1M for insurance core principles

MANILA, Philippines - The Asian Development Bank (ADB) has approved a $1-million technical assistance (TA) grant for the development of the insurance industries in the Asia Pacific region.

It likewise forged a partnership with the International Association of Insurance Supervisors (IAIS) for the application of insurance core principles (ICPs) and standards.

The IAIS is a voluntary membership organization of insurance supervisors and regulators from more than 200 jurisdictions in nearly than 140 countries.

In addition to its members, more than 130 observers representing international institutions, professional associations and insurance and reinsurance companies, as well as consultants and other professionals participate in IAIS activities.

The IAIS promotes effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability.

The $1-million grant will help fuel the IAIS core principles for both ADB developing member countries (DMCs) and the rest of the region.

The two international entities will develop a joint program to promote observance of IAIS ICPs and standards, including providing the IAIS core curriculum material, methodology, questionnaire, and tools to carry out self-assessments and peer review; and by providing limited resource and expert support.

The IAIS will likewise coordinate with The Asian Forum for Insurance Regulators, the ASEAN (Association of Southeast Asian Nations) Insurance Regulators Meeting, and the Pacific Inclusion Working Group to facilitate and coordinate such efforts.

In fact, the Organization for Economic Co-operation and Development (OECD) will provide the methodology and technical support for developing a pan-Asian database of insurance statistics.

The region’s financial markets, which are dominated by banks, are at various stages of development and sophistication.

The ADB agrees that a non-diversified finance sector represents a risk in terms of the inability to deal with financial shocks and periods of uncertainty.

“The transformation of the nature of financial intermediation by including insurance companies and pension funds could provide new mechanisms for channeling savings to investments.

These developments, accompanied by the emergence of equity and debt markets, and financial products like forwards, futures, and other derivatives instruments, have the capacity to reallocate risks and put capital to more efficient use,” it said in a recently-released report.

It added that insurance also protects the poor against livelihood risks and catastrophic loss, preventing them from falling back into cyclical poverty. It can also help mobilize long-term domestic resources to finance investments.