20% of buildings insured for quakes

MANILA, Philippines - Only 12 percent of buildings in the country have fire insurance while 20 percent are insured for earthquakes, the Philippine Insurers and Reinsurers Association (PIRA) said.

“Earthquake is a standard exclusion in a standard fire policy. You have to ‘buy back’ this exclusion so you will be covered,” said PIRA spokesman Michael Rellosa. “It is sad but many clients consider earthquake cover as an extra expense since they have to pay extra for it.”

As part of the catastrophic perils, earthquake, along with typhoon and flood, requires an extra premium of 0.15 percent of the total sum insured.

This means a P1-million house coverage will require an additional P1,500 in premiums for earthquake cover on top of the fire premium of P1,000 (0.1 percent), or a total of P2,500 yearly.

Rellosa said that the Bohol earthquake underscores the need for “mandatory earthquake insurance” being proposed by the Asian Development Bank, the Insurance Commission and insurers.

“The only way for earthquake insurance to be affordable is for it to have a huge base. And for it to have a huge base, it must be mandatory,” he said.

The proponents are talking with legislators for a bill that will make earthquake insurance mandatory, similar to the compulsory third party liability in the transport sector.

“PIRA has a technical working group on the proposed mandatory earthquake insurance. And this group is coordinating with the ADB and legislators for a bill that would require all residential buildings as well as buildings owned by small and medium-sized enterprises to be insured for earthquake,” Rellosa said.

He said the risk of earthquake is something Filipinos cannot avoid or manage.

“Earthquake is a risk that we all have to face one way or another. It is a reality in this country, just like typhoons. That is why we are pushing for this mandatory insurance to be able to empower our countrymen to face this risk,” he said.

The Philippines is located along the typhoon belt and the Ring of Fire, a vast Pacific Ocean region where many of the Earth’s earthquakes and volcanic eruptions occur.