Case Study

An insurance model for nature-based adaptation in the Philippines

The Philippines is one of the world’s most vulnerable countries to climate change, with USD 5 billion of GDP at risk from increased typhoons over the next 10 years. Nature's assets in the Philippines are a valuable and cost-effective tool for climate adaptation.

Mangroves provide a case in point. These coastal forests have been found in the Philippines to be 50 times more cost-effective as a coastal adaptation infrastructure than building and maintaining a cement seawall.

Restoring them could yield $450 million per year in flood-protection benefits for the country. However, the Philippines has already lost 50% of its mangroves to deforestation.

A blueprint for insurance innovation

Zooming in on five coastal cities in the Philippines, our most recent report Insurance Underwriting with Nature: How Mangroves can Transform the Climate Strategy of Companies, Cities and Re/insurers illustrates the value of the protection that mangroves provide against tropical cyclones. The report offers a quantitative model providing the basis to move beyond today’s business models and embrace a future where greener investments, insurance policies and partnerships draw on nature to speed up the race to resilience.

The report reveals that in some coastal cities, mangroves can reduce up to 100% of the physical damage from coastal storms and floods. By incorporating these values into Catastrophe (CAT) modelling and the development of products for corporate and government clients, the re/insurance sector could place itself at the forefront of climate innovation and make a positive contribution to the planet.

Our Partners

With support from the German government’s International Climate Fund (IKI), the model was developed to enable underwriters in the insurance/reinsurance sector in the Philippines to recognise the value of nature in climate risk mitigation, and reflect this in their policies.

To engage the country’s leading re/insurance companies and insurance regulators, we partnered with the Philippines Insurance and Reinsurance Association (PIRA). The goal was to facilitate an engagement, modelling and practical proposals that could mainstream the value of nature into the insurance sector’s growth over the coming decade. We engaged risk modellers and underwriters, scientists and data providers to formulate a new model and provide practical direction for insurance and reinsurance companies in the Philippines to begin to price nature effectively into their policies.

Catalysing industry partnerships

There is a role for insurance and reinsurance companies to partner with leading conservation groups, mayors and municipalities, to develop new prototypes and change processes within the insurance sector. To this effect, we have developed and funded a new programme with the Asian Institute of Management’s Bridging Leadership Center, pairing local mayors from vulnerable coastal cities of the Philippines with business and finance leaders, including insurance and reinsurance companies.

As a result of this programme, we are brokering new partnerships through which insurance companies are funding local conservation processes and experimenting with initiatives that will help redefine their insurance business; and are helping NGO-led efforts, such as Conservation International's Restoration Insurance Service Company (RISCO) to engage and partner with the insurance sector effectively.