Helen Clark: Speech at the High-Level Steering Group Committee Meeting of the Insurance Development ForumSep 28, 2016
IDF Chair Stephen Catlin,
Co-Chair Joaquim Levy,
Members of the High-Level Steering Group,
I am pleased to join you at this High-Level Steering Group Committee Meeting of the Insurance Development Forum (IDF). At the outset, let me thank Stephen Catlin for so ably carrying the baton as Chair of this Steering Group since the launch in April.
At UNDP, we also very much welcome the presence here today of so many CEOs of brokers, insurers and re-insurers.
Only five short months after the Forum’s inaugural meeting, we have a series of ambitious proposals to discuss. Before looking at these, let me reflect on why we are all here.
Between 1994 and 2014, disasters related to natural hazards have killed over 1.3 million people and affected more than 4.4 billion in total – including a disproportionately high number of women and children. Beyond the lives lost, the damages have been estimated at more than US$ 2 trillion.
For many developing countries with scarce resources, rebuilding is often beyond their means. Typically, a disaster is followed by appeals to bilateral, regional, and international partners for aid relief and financial support. This support, however, often falls well short of what is required. Systemic lack of funds and recurrent inefficiency of recovery initiatives on the ground impede progress.
I agreed to co-chair this Forum because I believe it can make a real difference to addressing these challenges. For the first time, it brings together three very different communities – the insurance industry, the World Bank and the UN - each playing an important and unique role in supporting countries to become more climate- and disaster-resilient.
The evidence is clear: insurance can be an efficient, fast-disbursing mechanism to build back better in vulnerable countries and communities hit by disasters, but also to reduce risks and the costs of risks in the long term. The business model for insurance mutualizes and spreads risk. This approach is key to making development risk informed. As a manager and carrier of risks, the insurance industry is also well placed to help communities and economies assess and mitigate around the multidimensional nature of the shocks they are facing.
Acknowledging this, Agenda 2030 has explicitly recognized insurance as a critical risk management tool:
- the Sendai Framework called for the promotion of mechanisms for disaster risk transfer and insurance;
- the Addis Ababa Agenda for Action called for the development of domestic capital markets, particularly long-term bond and insurance markets to meet longer term financing needs; and
- the Paris Climate Agreement called for increased co-operation and facilitation of risk insurance facilities, climate risk pooling and other insurance solutions.
Nevertheless, in 2015 alone, only $27 billion out of the $90 billion worldwide economic losses were insured . This ‘protection’ gap between insured and uninsured assets is even greater for vulnerable countries and communities.
- In Nepal, the April earthquake resulted in US$4.8 billion of economic losses of which only US$210 million of damages were insured
- Typhoon Haiyan in the Philippines cost between US$6.5 and US$14.5 billion of which only $300-$700 million was insured.
If left unaddressed, this ‘protection’ gap will only continue to widen given the increase in the occurrence of natural and man-made crises around the world. It is helpful that the initial focus of this Forum is on helping to close this ‘protection’ gap.
UNDP broadly welcomes all the working group proposals to be discussed today. We welcome in particular the idea of a Technical Advisory Facility (TAF) which would set up a dedicated facility to scale up the advisory capacity for public sector actors to support better management of the financial consequences of disasters resulting from natural hazards. UNDP looks forward to engaging with partners further in these discussions, as needed.
I wish you all a very productive meeting and I look forward to hearing about the outcome of the discussions.