Disasters highlight need for risk cover

The Philippine Insurers and Reinsurers Association (Pira) on Tuesday reiterated the need for risk cover, especially during the monsoon season when Filipinos are most exposed to various risks.

According to the Pira, typhoons serve to highlight the importance of the nonlife-insurance industry as people confront the risks brought by inclement weather and realize the importance of risk protection.

“Filipinos are fast becoming conscious of their vulnerabilities, no thanks to the spate of natural calamities that hit the country in recent years,” said the Pira, the umbrella organization of nonlife-insurance companies in the country.

In the United States, for example, insurers there now process claims seen reaching $20 billion. In Mexico, which was hit by an 8.1-magnitude earthquake recently, the catastrophe-insurance program called Fonden, developed by the Mexican government years ago, is being utilized. This means the insurance sector is up on its feet quickly as it responds to major catastrophe. The Pira cited these examples to prove that insurance plays a vital role in financing the recovery following disastrous episodes.

“It is in disasters that the importance of insurance is highlighted,” the Pira said in a statement.

Earlier, the Pira said an average of 20 tropical weather disturbances enter the so-called Philippine area of responsibility each year.  Of the total, approximately 10 become typhoons, of which around eight make landfall and around five will cause significant damage.

“Unfortunately, despite the regular occurrence of natural calamities in our country, we are often caught unprepared,” said Pira Deputy Chairman Michael F. Rellosa.

According to Rellosa, the first line of funding is the contingency fund managed by the National Disaster Risk Reduction and Management (NDRRM) fund. That fund had been slashed in half from P38.9 billion to only P15.8 billion this year. Only P5.77 billion remain as of end-March this year as P10 billion was spent for relief and recovery operations in response to typhoons Nona, Ferdie, Lawin and Nina, Rellosa said.

“One major problem with the NDRRM funds is not just the shortage of funds but actually the use, or, more specifically, the nonusage of such funds,” Rellosa added.