Climate and Disaster Risk Finance and Insurance in the Philippines:
Perspectives from the Sectoral Consultations

Complemented with risk management, climate and disaster risk finance and insurance (CDRFI) mechanisms are essential long-term climate adaptation options. CDRFI, which is widely applicable and beneficial in developing vulnerable countries such as the Philippines, highlights the economic benefits that serve as adaptive social protection (ASP), or reduction of risks brought by climate change impacts, for the government, private sector, and communities.

The Philippines has been among the top countries experiencing long-term climate risks and extreme weather events with an annual average economic losses of US$ 3.179 billion from 2000 to 2019 (Eckstein et al., 2021). Long-term climate risks and extreme weather events constantly affect the socioeconomic activities in agriculture, forestry, and fisheries (AFF). Coincidentally, the AFF sector is among the three major economic sectors in the country, contributing the least to total gross domestic product (GDP) with 8.4 percent in the second quarter of year 2022.

The Institute for Climate and Sustainable Cities (ICSC) and the West Flanders Synergy Project convened a roundtable discussion in April 2019 to initially explore the state of play of CDRFI. The discussion focused on the viability of weather index-based insurance (WII) as a risk transfer mechanism (RTM) for the agriculture sector. It also generally outlined the key players of insurance-related RTMs, which include indemnity-based, crop revenue, and weather index-based approaches. The challenges of leveling the playing field for these products to be marketable while being acceptable and affordable to farmers were also conferred during the roundtable discussion. However, WII products are still seen as too technical and expensive and are thus unattractive to smallholder beneficiaries. 

Danica Marie Supnet, Janssen Martinez, and Angelika Marie David, ICSC

Reviewed by:
Felino Lansigan, Ph.D., Professor Emeritus, University of the Philippines Los Baños and Climate Adaptation Advisor, ICSC;
Angelo Kairos Dela Cruz, Incoming Executive Director, ICSC;
Michael Zissener and Magdalena Mirwald, Munich Climate Insurance Initiative (MCII)

Multi-Actor Partnership (MAP) on CDRFI in the context of the InsuResilience Global Partnership (IGP) is a global project implemented by a group of civil society organizations from Laos, Sri Lanka, Malawi, Madagascar, Senegal, Philippines, Caribbean, and Germany. In addition to global level influencing work, the core of MAP in the Philippines will be engagement in both the national and subnational level, capacity development and the establishment of MAP on climate risk finance. ICSC is the main implementer of MAP in the country.

This project is funded by the German Ministry for Economic Cooperation and Development (BMZ) and is coordinated by CARE Germany together with Germanwatch and the Munich Climate Insurance Initiative (MCII).