Agriculture, sabotage & terrorism, and financial lines are emerging product lines that "deserve a closer look and study", Insurance Commissioner Dennis Funa has pointed out.

In his opening speech during the non-life session of the 4th Annual Technical Forum (ATF) organised by National Reinsurance Corporation of the Philippines (Nat Re) last month, he mentioned how certain developments in the country—namely food supply concerns, violent attacks in Mindanao, and the sustained growth of the Philippine economy—should further encourage insurers to “take their imagination further” when developing these emerging product lines.

With the theme “Uncovering Insurance Opportunities”, the ATF convened industry experts to provide its attendees insights on new opportunities for non-life and life insurance products in the Philippines. The ATF was attended by more than 100 COOs and chief underwriters of the country’s insurance companies.

Terrorism pools

Mr Weimeng Yeo, director at the catastrophe risk modeling company Risk Management Solutions (RMS), delivering the main presentation on sabotage & terrorism lines, said that insuring terrorism remains a significant challenge since “the loss itself can be very challenging for the private market to absorb”. He added, “Government agencies have to intervene to provide risk transfer.“

Mr Yeo said that terrorism is particularly challenging for companies to insure because of the high exposure and high risk, high loss outcome uncertainty, and small event footprints. The risk landscape is also highly fluid unlike in natural catastrophes; any event can trigger an act of terrorism.

It is for these reasons that several countries have established terrorism pools, which are “state-funded terrorism insurance facilities”. He gave a brief overview of the structures of such pools in countries such as Australia, Belgium, India, and South Africa.

While the Philippines can pattern its possible terrorism pool after these existing ones, Mr Yeo stated that the nature and the cover of these pools ultimately depend on the capacity of the nation arranging it. He likened terrorism pools to snowflakes in that they are “unique based on the context of the countries that generated the pools”.

Mr Werhner Parel, Senior Corporate Adviser at MAA General Assurance, pointed out that in the countries Mr Yeo cited, “it is the policymaker that pushed [for] the pool— voluntary, mandatory, elective, or whatever form it may be."

Mr Yeo added that governments in these countries have been cognisant that losses arising from terrorist attacks can be significant and that the government cannot absorb all these losses. He noted that it is helpful to explore what public-private partnerships or working groups between public and private entities can be established to address this risk.

Ms Sharon Navarro, cluster head for fire & reinsurance at Malayan Insurance, said that in creating a terrorism pool, the Philippine insurance industry can combine resources to better address the needs of the local market. “It will also help us build expertise in terms of underwriting and understand terrorism as a peril better,” she added.

Cyber insurance

Mr Joel Pridmore, head of financial lines & business development of the Asia Pacific at Munich Re Syndicate Singapore, pointed out that the opportunity for cyber insurance is large especially with data privacy protection laws requiring firms to report to their regulators cases of major breaches or attacks. Small and medium enterprises which may not be equipped with the personnel necessary to deal with the consequences of a breach can benefit greatly from cyber insurance.

“A lot of the large institutions in Australia, the USA, and around the world buy cyber cover not for the liability aspect but for the breach response services,” Mr Pridmore said. “[If] you suffer a breach, part of the [insurance] policy is a crisis management component where you have access to specialists in forensic information technology, lawyers, and public relations officers who will project manage the response.” Some of the services that these professionals provide include identifying possible vulnerabilities in the system, rectifying or shutting down a system, and preparing reports to stakeholders.

He said that in the Philippines, the tourism industry, with the amount of personal tourist information that it collects, and the manufacturing sector, with the potentially catastrophic effects of business interruption, are high targets of cyber attackers which can be a boon for cyber insurance. The business process outsourcing and banking sectors can be big markets as well for cyber insurance in addition to professional indemnity and D&O liability.

Agriculture insurance

Mr Christopher Coe, head of agriculture of Southeast Asia at Aon Benfield, spoke of the far-reaching effects of crop insurance on financing for rural economies. “It’s not just to give help to them—there’s a more political than economic factor to it,” he said. “If we can give crop insurance so that there is some payment to the farmers [when they experience a loss], that’s something that banks can use as collateral... You then get the chance to open up and finance the rural economy. Banks will be giving more loans because they have that collateral. There is money that can be channeled into the rural economy...and more crops can be growing.”

Mr Geric Laude, head of non-life retail at Pioneer Surety & Insurance Corporation, emphasised the importance of collaboration between the government and industry. He said, “Let us not act in isolation. We are talking about our interest as an industry but we are connected to the bigger value chain.”

He added, “Financing, for example, is there to help us push this forward. Food security is an agenda that’s very strong that’s going beyond insurance.”

To promote the involvement of the private sector, Mr Laude said that the industry still needs help on certain fronts. That includes providing insurers with financial incentives and usable and shareable data; addressing the lack of awareness, capacity, and capability among insurers to develop agriculture insurance; and, properly assessing the data and infrastructure needed to develop these products, particularly index insurance.