Creating a disaster risk insurance product for coastal communities in the Philippines

Creating a disaster risk insurance product for coastal communities in the Philippines

Project Lead: Pula Advisors
Supporting Partners: Nature Tech Innovation Group and the Philippine Crop Insurance Corporation
Support: Received mentoring and training from the Ocean Resilience Innovation Challenge (ORIC) which is financially supported by the Swiss Re Foundation, the UK’s Blue Planet Fund, and the United States Department of State. 
Location: The Philippines
Financial Innovation: Parametric Insurance

Summary 

Pula Advisors is developing a parametric insurance product that covers typhoons, floods, and droughts in the Philippines, guaranteeing a predictable and timely response to populations who have suffered damage to their crops or coastal farms. This insurance aims to proactively protect rather than reactively compensate those who are affected by seasonal typhoons. Moreover, it is more affordable, and contains quick and transparent pay-outs, compared to traditional indemnity products.  

Challenge 

Between 2013 and 2020, The Philippines experienced around 23 natural disasters, including Super Typhoon Yolanda, which caused over USD$1.7 billion in damages, one of the costliest in the country’s history^[1]. Yet, seasonal typhoons are getting stronger and occurring more frequently, leading to extreme dry seasons with record high temperatures that damage farm productivity and result in losses. Oftentimes, the workers hit hardest by these events are smallholder farmers.

In the Philippines, the current reactive approach to disaster response is ineffective. Lengthy funding applications delay the rate of relief provision to the affected population, resulting in loss of assets, and risks to their lives and livelihoods.

Solution

Pula Advisors is developing a disaster risk insurance product for smallholder Filipino farmers that guarantees predictable and timely payouts, so that affected populations can cope better with climate shocks and recover from financial losses. The insurance is a hybrid of typhoon and area yield index insurance to build resilience to storms, floods, and droughts. To empower farmers, the insurance product aims to cover the value of the inputs purchased (i.e. seeds, fertilizers) as well as the value of goods for business owners – such as business infrastructure. The insurance cover will be an annual policy.

Scalability and Next Steps

Under the ORIC23 cohort, Pula Advisors are currently exploring the product design and methods to engage community and government stakeholders. They are developing mechanisms to provide education and training to farmers and customers and other efforts will be made to raise awareness through marketing, encouraging a wider take-up of the product.

“We will be pleased to join forces with ORRAA and its partners to deliver this product to the coastal communities in the Philippines. We are also thankful to our local partners, particularly the government of the Philippines and our reinsurer partners who came forward and supported our pilot. The scale of the program will help provide certainty for the most vulnerable communities in the Philippines, unlocking investment across the country with effective risk mitigation in place to protect against natural disasters.” – Pula Advisors

[1] https://newsinfo.inquirer.net/1357898/in-photos-looking-back-at-super-typhoon-yolandas-onslaught-in-2013