Summary 

In May 2022, the Maldives Monetary Authority (MMA) and UNDP entered a partnership to conduct a diagnostic study of the insurance industry launching its findings in November of that year. The report highlighted several opportunities for the insurance industry in the space of risk financing including in tourism, agriculture and the fisheries industries. Consequently, in August 2023, MMA and UNDP formulated the Maldives Insurance Development Project to as a medium-term instrument of support to outlay the vision of developing the insurance industry. This includes both strengthening the regulatory capacity of MMA’s insurance division and the exploration of market opportunities for the Maldives in nature-based insurance and risk financing. The principal intent of the partnership was to ensure readiness of the insurance industry for risk financing and to build the country’s sustainable investment pipeline. Through this partnership three of the eleven insurance regulations, which will be mandated under the forthcoming Insurance Act, have already been developed and a feasibility assessment on insuring the country’s coral reefs has been conducted. Phase 1 of the project has attracted the support of several new donors such as GFCR, BIOFIN and CDRI, with UNDP functioning as a convener of these resources for MMA. This project is the second phase of this partnership expanding on the regulatory support and the development of nature-based risk financing pipelines. The focus of this partnership will be on developing and institutionalizing core insurance regulations while further exploring nature-based risk financing and insurance with an emphasis on natural catastrophe insurance, fisheries and agriculture insurance. 

Background 

The insurance industry in Maldives is relatively nascent compared to more developed economies. The industry currently manages assets worth approximately MVR 2.98 billion and employs around 500 individuals. The total Gross Written Premium (GWP) for the insurance sector is estimated to be around MVR 1.65 billion. Nevertheless, the industry’s role as a mediator of market risk enables a sizable portion of the overall financial portfolio of the country. Maldives’ prospects for sustainable finance rests on its capacity to leverage additional financing for renewable energy and adaptation. It remains one of the most vulnerable countries in the world ranking 117th out of 187 countries on the ND-GAIN Index due to its susceptibility to rising sea levels and climate change. While nascent, the insurance industry is expected perform a fundamental role in the country’s bid to secure climate finance by enabling several opportunities, without which its absence would render the financial risks too great for the relative investment benefit.  

For insurers, as risk managers and custodians of pools of risk, a stable and reliable background against which to conduct their business is fundamental. Economic and statutory certainty will be needed to create a conducive structure for risk management that allow the shift of risk to new carriers and spread risk among more insurers.  

As the country explores strategies to diversify its economy, insurance presents itself as a prospective growth driver and market enabler – a primed and practical vehicle for investment. It maintains among the higher growth rates among the economic sectors in Maldives with its annualised growth of gross written premium from 2015 to 2023 averaging 14% per annum. In this period, the insurance industry was the fastest growing industry in Maldives with an annual average growth rate of 17.2%, narrowly beating tourism (16.9%) and growing 2.5 times faster than the country’s GDP. The industry also presents a good degree of diversity with 2 of 5 operators offering a takaful service window with both operators conducting general takaful and family takaful business. The industry also shows remarkable resilience to economic shocks declining only 3.4% in 2020, where the country’s GDP declined by 30% in the same period, presenting itself as a natural hedge 880% more resilient to shocks than the overall economy. 

Measured by income, Maldives is positioned among the higher quartiles; even among upper-middle income countries, with a real GNI per capita of USD 11,070 in 2023 (World Bank Atlas Method). This is against the global entry classification threshold of $4,516 and a graduation threshold of $ 14,006 to high income classification. Its impressive growth history considered, the country is soundly on track to graduate to high income status between 2035-2040. In this evolving landscape, the country context for development finance has fundamentally transformed with the relative proportion of grant ODA as a proportion of the national budget standing at only 2% in 2024, while foreign loans make up 20% of the budget for 2025. As per national accounts, in 2025 the value of foreign loans received by Maldives will be 1800% greater than it was a decade ago in 2015.  As the relative importance of grants diminish, opportunities for blended finance have increased. As of February 2025, the total value of investment in green bonds (a subset of total green finance), stood at $4.9 trillion – a growing pot of resource Maldives is primed to access. 

SDG finance requires the blending of domestic and international resources, where Domestic Resource Mobilization for the SDGs remain a key requirement. Maldives needs to build the governance structures and investment pipelines for sustainable financing for which impact-aligned investment can be catalysed. These pipelines include thematic bonds, nature-based financing, debt for development swaps, risk financing and many more. A mature insurance industry is a necessary safeguard and condition for most such investment and is often the primary instrument of investment, for example in risk financing and nature-based financing. Mechanisms for risk-pooling need to be designed with means to consolidate resources from the private sector, the public sector, impact investors and philanthropic funds.  

Maldives already invests a substantial proportion of its public revenues in environmental protection, a figure summing up to 4% of its annual budget in 2023. Predictions on liabilities associated with the environmental service costs are being realized today with public expenditure on environmental protection surging by 375% between 2020 and 2023 owing to the increased frequency and intensity of storm surges, unpredictable and heavy rainfall, rapid erosion and intensifying global ocean temperatures. The protection gap in the country remains unknown with very little penetration of the insurance industry in nature-based risk mediation relative to countries with comparable GNI. Nature and biodiversity are intricately linked to livelihood opportunities in the country and, they themselves, services a substantial amount of the potential losses from climate events 

Project Outcomes 

Outcome 1: Regulatory environment for effective supervision of the insurance industry in Maldives is strengthened.  

Outcome 2: Building the service offer and investment pipeline in Maldives to include disaster insurance and nature-based insurance 

Outcome 3: Exploration of Sustainable Finance Pipelines in Maldives. 

GESI/GEWE Component 

The project was developed with wide consultation from stakeholders including local councils, civil society groups and the private sector. The project and its components satisfies the requirements to meet Gender Marker 2. 

Major Achievements 

The partnership has produced three important pieces of regulation for the insurance industry in Maldives fully incorporating Takaful concerns. They are The Actuarial Regulations of Maldives, the Standards for submitting Regulatory Returns – against IFRS 17, Regulation on Insurance Solvency and Risk Based Capital - against IFRS 17. 

Furthermore, through this partnership the country’s first feasibility study of using index based parametric insurance was developed and launched at the Fourth International Conference on Financing for Sustainable Development in Sevilla. The study focused on the insurance of the country’s coral reefs.   

National Partner: 

Maldives Monetary Authority 

Donor and Funding: 

Maldives Monetary Authority 

Coalition for Disaster and Resilient Infrastructure 

BIOFIN Canada 

Total Resource Mobilization 

Expenditure to Date: USD 170,000 

Project Duration: 2023-2026