MANILA, Philippines - The government is proposing the establishment of "catastrophe risk insurance", which will insure countries from natural disasters, Finance Secretary Cesar Purisima said on Monday. This comes after last week's massive floods destroyed homes and left thousands homeless in Metro Manila and nearby provinces.
During a budget hearing at the Senate, Purisima said the government has submitted its proposal for "catastrophe risk insurance" to the World Bank in 2010.
"We've proposed to the World Bank that all countries be asked to be part of a mandatory insurance pool and the insurance premium to be based on each country's share of the carbon footprint," he said.
The risk pooling facility is aimed at limiting the financial impact of catastrophes to member-countries by providing short term liquidity when a policy is triggered.
"We continuing to explore other financial instruments to help us deal with financial risks brought by disasters," the Finance Secretary said, when questioned about the Department of Finance's disaster-preparedness.
If the proposal is adopted by multilateral institutions such as the World Bank and Asian Development Bank, Purisima said disaster-prone countries like the Philippines can be protected.
The Philippines has yet to secure the support of other countries for the proposal, but Purisima remains hopeful.
"It should be the initiative of many countries, the concept of risk sharing is among the countries and I hope I will get traction," Purisima said.
The government is looking at the Caribbean Catastrophe Risk Insurance Facility (CCRIF) as a model. The CCRIF is the world's only regional fund utilizing parametric insurance, giving Caribbean governments the unique opportunity to purchase earthquake and hurricane catastrophe coverage with low pricing.
For instance, the facility paid out around $1 million to the Dominican and St Lucian governments after an earthquake in November 2007.