Fiji, October 17, 2019 – IFC, a member
of the World Bank Group, and the Fijian Government have signed an agreement
that paves the way to help the country’s disadvantaged families and farmers
gain access to an insurance payout in the event of a severe cyclone.
The Memorandum of Understanding (MoU) was
signed at a meeting on the sidelines of the Annual Meetings of the World
Bank Group-IMF in Washington DC, by Fiji’s Minister of Economy, Aiyaz
Sayed-Khaiyum and IFC’s Vice President for Asia and the Pacific, Nena
“The impacts of worsening cyclones are locking
countries like Fiji in unsustainable cycles of rebuilding from climatic
devastation. The solution lies in innovation. We need to expand the toolbox
of financial products that help grant our economies greater buoyancy to
rebound from these disasters,” said the Attorney-General. “Our plan –
in cooperation with IFC – is to offer vulnerable Fijian families and farmers
quick access to insurance pay-outs in the aftermath of a severe weather
event – bringing our people security in the face of a changing climate
and keeping our economy on a sustainable pathway with built-in resilience.”
Under the plan, IFC is working on an insurance
scheme for disadvantaged families and farmers, whose homes would normally
be considered uninsurable. Depending on the severity of the wind speed
striking a province, the aim is for registered households to receive a
cash payout to their bank account, or a voucher to help them rebuild and
recover quickly from the damage.
“Fiji is highly susceptible to natural disasters,
particularly cyclones, and we know that 94 percent of homes in the Pacific
Island nation are currently uninsured against tropical cyclones,” Stoiljkovic
said. “There is clearly a case for a bigger insurance market in Fiji,
and IFC sees this initiative as a significant first step in spurring new
insurance products. We look forward to working with the government and
the private sector on this important initiative.”
The initiative comes after an assessment of
the devastation left by category five Cyclone Winston in 2016, which caused
an estimated US$900 million in damages and losses. Overall economic losses
from Cyclone Winston, the most intense tropical cyclone ever experienced
in the southern hemisphere, amounted to almost one third of the country’s
GDP. The assessment showed 78 percent of damages and loss were borne by
the households and agriculture sector, with less than three percent of
those losses insured.
With the frequency and severity of climate
related disasters continuing to rise in the Asia Pacific region, IFC has
been working with the private sector to help combat the challenges and
build up resilience through innovative and accessible insurance products.
IFC’s work to date in Asia Pacific has seen policies and payouts for smallholder
rice and corn farmers in the Philippines, as well as farmers in Bangladesh
and Sri Lanka insured against drought and rural banks in Indonesia
insured against earthquakes.
The IFC initiative is undertaken as part of
the Fiji Partnership, supported by Australia and in partnership with the
Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) supported
by the World Bank. Support from the Global Index Insurance Facility
(GIIF) trust fund was also instrumental in initiating this project.
The Bank is, in parallel, working on developing
an insurance product to cover houses that would be eligible for indemnity
insurance with some alterations done to secure the house against cyclones.
It is hoped that the World Bank Group’s plans for two insurance products
will spur other private insurers in Fiji and the Pacific region to enter
and expand the disaster risk insurance market.
IFC—a sister organization of the World Bank and member of the World Bank
Group—is the largest global development institution focused on the private
sector in emerging markets. We work with more than 2,000 businesses worldwide,
using our capital, expertise, and influence to create markets and opportunities
where they are needed most. In fiscal year 2019, we delivered more than
$19 billion in long-term financing for developing countries, leveraging
the power of the private sector to end extreme poverty and boost shared
prosperity. For more information, visit www.ifc.org
About the Fiji Partnership:
The initiative is supported by Fiji Partnership. Through the Fiji Partnership,
Australia and IFC are working together to stimulate private sector investment,
promote sustainable economic growth and reduce poverty.
The Global Index Insurance Facility (GIIF) is a multi-donor trust fund
managed by IFC and jointly implemented with the World Bank. The donors
include Japan, the Netherlands, the European Union/ACP and Germany. The
facility’s objective is to expand the use of index insurance as a risk
management tool in agriculture, food security, and disaster risk reduction.