By Chino S. Leyco

Finance Secretary Carlos G. Dominguez III asked the World Bank to assist the Philippines in crafting an insurance structure for its public assets in cooperation with private reinsurers to enable the government to respond faster and better to natural disasters.

Dominguez pitched this proposal during his first meeting with Fabio Kanczuk, the recently elected Executive Director of the World Bank Group Constituency of Brazil, Colombia, Dominican Republic, Ecuador, Haiti, Panama, Philippines, Suriname, and Trinidad & Tobago.

Their meeting was held on the sidelines of the Annual Meeting of the World Bank Board of Governors held last month in Bali Nusa Dua, Indonesia.

“We want to develop this strategy in which we can have a way to analyze our risks to decide how much we will take and how much we will pass on to the insurance market, not only for our national government assets but also for assets at the local government level,” Dominguez said.

Kanczuk, the former Secretary of Economic Policy of Brazil’s Ministry of Finance, assumed his new post at the World Bank last November 1.

His predecessor, Otaviano Canuto, also met with Dominguez here to bid farewell and assure the Philippines of his continued support for its development programs as he returns to the private sector.

Dominguez informed Kanczuk that the Philippine government is planning to also work with Lloyd’s of London and the Citi Group to explore the possibility of tapping reinsurance facilities and accessing the capital markets to obtain financial cover for state assets.

While in the United Kingdom last September on official business, Dominguez met with executives of Lloyd’s of London, the world’s leading insurance and reinsurance market, to learn about global best practices and ways of strengthening the Philippines’ fiscal resilience.

Dominguez said it would be “irresponsible” for the government to embark on a $170 billion infrastructure program without complementing it with a comprehensive disaster risk financing and insurance program.

During the meeting, Lloyd’s officials gave Dominguez and National Treasurer Rosalia de Leon an overview about the different public asset insurance structures that the Philippine government can tap to improve coverage for its assets and properties.

After the briefing, Dominguez instructed De Leon to continue the Bureau of the Treasury’s engagement with Lloyd’s and the World Bank to discuss an appropriate insurance protection structure that could be put in place at the soonest possible time for the government’s assets and properties.

The Philippine government, Dominguez said, wants to create a national system where various state entities, down to the local government units (LGUs), can rely on a rational structure to evaluate risks and access resources for risk protection and management through a public asset insurance program.

Dominguez acknowledged that the government faces an enormous task of formulating this type of public insurance structure, given that the Philippines is now just starting to come up with its registry of national assets.

In terms of natural disasters, a catastrophic risk modelling developed for the Philippines shows that the country is expected to incur, on average, P177 billion in annual losses in public and private sector assets arising from typhoons and earthquakes.

Ensuring comprehensive and adequate insurance protection for government assets would help shield the fiscal budget from volatile shocks arising from catastrophic events and would also safeguard the government’s long-term development objectives, Dominguez said.

While some state assets are insured, in most cases, these are either inadequate to indemnify the government or lack the budget for premium payments.