Parametric insurance can help improve financing access — BSP

PARAMETRIC INSURANCE can help make financing more accessible to sectors vulnerable to adverse weather and climate change, the Bangko Sentral ng Pilipinas (BSP) and the Insurance Commission said.

BSP Assistant Governor Pia Bernadette Roman-Tayag said linking parametric insurance with credit can help the agriculture and fisheries sectors, as well as micro, small, and medium enterprises (MSMEs), get easier access to loans.

Backing credit with insurance protection can support continued financing for sectors vulnerable to climate change risks, Ms. Roman-Tayag said.

“If climate-exposed sectors become more resilient, they become more bankable, which leads to stronger enterprises, more resilient supply chains, and an economy better able to withstand shocks,” she said in a webinar held on May 13. “This is what payout under parametric insurance makes possible.”

Parametric insurance provides coverage for a pre-agreed set of adverse conditions instead of reimbursing the policyholder for the actual losses or damages, according to the United Nations Development Programme.

There are automatic payouts once the predefined weather indicators reach the set thresholds.

“When bundled with credit, it can serve as a credit-enhancing tool that supports continued financing in climate-vulnerable areas while strengthening financial institutions’ risk management practices,” the BSP said.

“Parametric insurance and credit bundling are, at their best, bayanihan in financial form,” Insurance Commissioner Reynaldo A. Regalado said during the same webinar. “A bank, an insurer, a cooperative, and a borrower all share a risk that none of them could carry alone.”

According to the Philippine Crop Insurance Corp., about 12,000 municipal fisherfolk in the country have been enrolled in their weather index-based parametric insurance program as of March.

The webinar, which the BSP said was part of its sustainability agenda for financial resilience and inclusion, also discussed topics such as international best practices, product design, credit integration and distribution channels for bundled insurance products.

It was attended by over 400 bankers, insurers, and development partners, including representatives from the German Agency for International Cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit), Center for Agriculture and Rural Development Mutually Reinforcing Institutions, CLIMBS Life and General Insurance Cooperative, Rare, Philippine Insurers and Reinsurers Association, Banco San Vicente, Land Bank of the Philippines, and Pioneer Insurance. — Katherine K. Chan