More LGUs seek asset cover against catastrophic events

 

The Government Service Insurance System (GSIS) aims to offer, by early next year, a disaster risk-insurance cover for local government units (LGUs) to help communities recover quickly from catastrophic events.

GSIS President and General Manager Robert Vergara said the government is coming up with a national plan for disaster risk financing and has started working with the Department of Finance (DOF) and the Department of Budget and Management (DBM).

“We actually participated in discussions on this. The GSIS is spearheading efforts to try to put in place some type of cover which will be a catastrophe-driven cover but at the provincial level, so that if we get a situation like [Supertyphoon] Yolanda  [international code name Haiyan] again, the money will be available right away,” he told a gathering of financial journalists.

He explained the insurance cover will not take the place of a normal property insurance.

“It really addresses the issue that historically, when an area is hit by calamities, what hampers the relief efforts is the lack of quick funds,” Vergara said.

What the government is looking at is some kind of cover available to the provinces that are affected by catastrophes, he continued.

He also said such a product was too late for the ongoing typhoon season but that everyone is hoping such should be in place already for the typhoon season in 2016.

One of the challenges, according to Vergara, is the cost of paying the premium. He said they need to work with DOF and DBM because the various LGUs may not be ready to afford the insurance cost.

“We’re hopefully looking at donor agencies that would want to help. But how exactly it will happen needs to be discussed,” he acknowledged.

In the first six months, GSIS reported an 8-percent increase in insurance premium revenues.

He said the P800-million increase in insurance premium came from government agencies.

Vergara said the GSIS’s insurance business continues to post growth as more and more agencies do business with the GSIS.

As LGUs are more careful with the assets they are responsible for, this has led to the increase in insurance revenues, Vergara said.

There is an existing legislation-making mandatory for LGUs to insure their assets with the GSIS, but that for some reason or other, many have not been insuring or were underinsuring their assets.

“When we look at the amount of LGU assets or holdings that are insured, we estimate about a third are actually insured. I think that’s a very responsible decision on the part of the LGU heads because of the frequency of calamities,” he said.

“Maybe we’ll be able to see more government agencies getting insured at the second half of the year. We see most of the first- and second-class municipalities are now insuring their assets,” he added.

In times of emergency, the affected area could really use the insurance to mobilize quickly what they need.

 

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I HAVE always enjoyed reading Dean West’s blogs, which are insightful and laced with a bit of humor. Dean is founder and president of Association Laboratory Inc., a US firm that provides quality information and strategic insights to association leaders.

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