![]() Once approved for full market deployment, they will be underwritten by three private insurers, and will target farmers, fishers, market vendors, MSMEs (micro-, small and medium enterprises) and social welfare recipients. Similar schemes will be launched in Tonga and Vanuatu later this year, followed by Solomon Islands and Samoa in 2023. The pilot phase in Fiji has seen 1,388 households sign up for the scheme, and the aim is to onboard a further 4,000 before the start of the 2022 cyclone season in November. Payouts are triggered based on pre-determined events, such as a minimum level of rainfall or the strength of a cyclone, with no need for verification of losses. This product offers combined coverage against high wind and heavy rainfall related risks, with maximum payouts of up to $2,000 at a premium of 10% per annum. Our Pacific Insurance and Climate Adaptation Programme recently launched the Pacific’s first climate and disaster risk parametric micro-insurance. ![]() ![]() These features improve transparency, help avoid disputes, and can reduce costs. ![]() There is no need for individual loss assessment, as there is with indemnity insurance. With index insurance, payouts to the insured are triggered by a predetermined index that is used as a threshold, and the amount of the benefit is also determined by the value of the predetermined index. Index insurance offers opportunities to solve some of these issues. When disaster inevitably strikes, the most vulnerable often do not have the means to financially cope and are pushed further into poverty. This means that in a region highly vulnerable to natural disasters, most people lack the financial protection insurance provides. Product distribution channels are also not accessible to consumers who live, for example, on remote islands far away from the insurance branches located in urban centres. In the Pacific, indemnity products are not priced for mass market consumers and mainly cater for high-income groups. Indemnity products typically insure against physical losses such as house fires or car accidents, and payouts are made after damage assessments are carried out. These markets are currently dominated by indemnity-based insurance products. Samoa, at 21%, fares better than its neighbours but in Vanuatu coverage is only 5%. A survey in Tonga in 2014 produced similar findings: only 13% of Tongans have access to any form of insurance. Fiji’s 2020 Financial Services Demand Side Survey showed that only 15% of adults have access to some form of insurance. Several challenges need to be addressed for the growth and development of insurance industries in the Pacific. Traditionally, insurance access in the Pacific has been confined to medium- to high-income level urbanites, but now there is a move to embrace low-income rural dwellers as well. In May, the Pacific Islands Forum’s Acting Secretary General, Dr Filimon Manoni, spoke about the need for ‘fit-for-purpose’ disaster risk financing instruments to help Pacific islanders better cope with natural disasters, with parametric (or index-based) insurance proposed as one potential solution. It has resonance across the region as indications emerge of a vibrant insurance movement, driven by growing interest from insurance companies to explore mass markets, as well as support from governments and central banks. Our new report – ‘Index insurance best practices for insurance regulators and practitioners in the Pacific Island countries’ – is important for insurance stakeholders in the Pacific and beyond. ![]()
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