As Prepared for Delivery

Before I begin my remarks, I would like to make the following acknowledgements: the Governor of the Central Bank of Samoa, Maiava Atalina Emma Ainuu-Enari; Senior officials representing Central Banks and government ministries; CEOs and officials from the private sector; Representatives from NGOs, CSOs, cooperative and partner agencies; UN colleagues and media representatives and invited guests.

Greetings to you all. I am honored to address this gathering on behalf of the UN Capital Development Fund (UNCDF) to launch the Index Insurance Best Practices Guideline for insurance regulators and practitioners in Pacific Island countries. I’d like to start by reiterating what I wrote in the report’s foreword: this is a comprehensive, well-researched and unique document that sheds light on an emerging concept in the Pacific’s insurance space: Index insurance. Index Insurance has been identified as an effective disaster risk management and coping tool for developing countries facing down the brunt of climate change.

We know that the impacts of extreme weather events weigh heavily on the minds of all Pacific Islanders. Report after report has detailed how these impacts will intensify in the coming years, putting the most vulnerable at heightened risk. What does vulnerability mean? Simply that this specific group of people will suffer more than others during natural disasters due to reasons beyond their control.

The lack of access to financial instruments or climate and disaster risk insurance compound these vulnerabilities in a significant way. In Fiji, insurance uptake stands at 15%, with only 7% of the insured living in rural areas. And multiple UNCDF demand side surveys indicate similar trends across the region: In Solomon Islands, for example, insurance coverage in the lowest-income segments accounted for less than 3% of respondents. In Tonga, almost 90% of the respondents did not have insurance. Similarly, in Vanuatu, only 5% of the respondents subscribed to any type of insurance product.

These figures are acutely low compared to international benchmarks. The studies also show that the uninsured very often engage in risky financial coping measures in the aftermath of an extreme weather event. Some are forced to dip into what little savings they may have. Others sell off critical livelihood assets just to meet their immediate financial needs. Many fall victim to loan sharks who are ever ready to exploit disaster situations for their own benefit.

The figures also present regional insurance stakeholders with a very real opportunity to tailor solutions to the specific needs of vulnerable groups. And the region’s leaders have spoken eloquently in global forums about the urgent need for solutions to respond to the climate crisis.

We strongly believe that index insurance has immense potential in this regard, provided the right regulatory conditions are in place. For instance, the regulatory practice guideline highlights the importance of re- insurance and co-insurance for Pacific Island Countries, particular as consumer protection measures are similarly lacking in most Pacific nations. The report draws on international best practices to provide guidance to insurance stakeholders in the region on how these areas can strengthened for maximum benefit. There are further details on product designing, piloting and testing, distribution and marketing.

The central theme in all of the recommendations outlined in the report is to foster an enabling regulatory environment in the Pacific that makes insurance more accessible for the traditionally uninsured. Index insurance can also aid efforts against climate change given the wide scope for innovation that it offers. UNCDF, through its flagship Pacific Insurance and Climate Adaptation Programme (PICAP), has developed a unique parametric micro-insurance product that pay outs benefits based on predetermined triggers like cyclonic storms. In fact, I have been informed that 1388 households were covered under the product last year and the plan is to increase this figure to 4000 households before Fiji’s next cyclone season. Additionally, there are also plans to expand to other Pacific SIDS- Tonga and Vanuatu in 2022 and Samoa and Solomon Islands in 2023. This means more Pacific islanders will be insured against cyclonic storms and other extreme weather events, thereby increasing their financial preparedness and resilience.

Additionally, there is similar scope to develop weather-index and yield-index crop insurance products, hybrid products and non-meteorological natural disaster risk products. On this point, I would like to take this opportunity to thank the Fijian Government for removing VAT on the premiums of PICAP’s product, and the Reserve Bank of Fiji for including it in the Regulatory Sandbox.

I would like to close by extending my profound congratulations to my Pacific colleagues as well as the Access to Insurance Initiative for developing a forward-looking publication that I am sure will inform the insurance market, not only in the Pacific but other developing markets for many years to come.

Disaster risk financing, in the face of the growing economic and social impact of extreme weather events, is an important part of UNCDF’s global climate agenda and programming. Today’s event is hopefully a powerful demonstration of this point. Rest assured, we will be stand side-by-side with you on this journey to develop a more informed and mature insurance market in your countries and regions, with effective and enabling regulations to boot.

Thank you very much and all the best.