Lectures &

News & Views

Law &



Trust Products
& Practice

About the Guru


Email Feedback

Guest Register










Environmental Risk and Insurance Management

(Article published in the Oct. 24, 2007 issue of Manila Standard Today)      

Reynaldo A. De Dios must have been planning this significant symposium  for some time.  One cannot, even if one were the country’s longest living non-life insurance icon as he is, assemble experts on such an esoteric subject as environmental risk and insurance management at a moment’s notice.  But the planets have aligned themselves to give him an assist recently.  And like they did for his Insurance Philippines’ “Third Philippine Non-Life Insurance Summit” held last year, insurers and insured are sure to flock in since the subject has been hugging the headlines.

Less than two weeks ago, Al Gore and the U.N.'s Intergovernmental Panel on Climate Change won the 2007 Nobel Peace Prize Friday, calling world-wide attention to the serious consequences to everyone of global warming.  And just last week, in a briefing he conducted to update the country on what the Presidential Task Force on Climate Change is doing, Energy Secretary Angelo Reyes told his audience what everyone already knows.


“Global warming,” he said, “could threaten the Philippines food and water supply, along with the health livelihood and habitats of communities.”  The good secretary was not being an alarmist.  The hazards Filipinos face were described in more detail earlier by WWF-Philippines Vice-Chairman Lorenzo Tan thus:

“The Philippines, as an archipelago, is a country at risk…Our coastlines, rivers and lakes are vulnerable. Extreme weather events and rising seas will damage and eventually inundate all coastlines and fishponds. Total brackish water hectarage currently devoted to aquaculture along coastal areas in Bulacan, Cavite, Pangasinan, as well as Iloilo, Negros, Bohol, Cebu, Zamboanga, Surigao, South Cotabato, Davao, and Sulu could be dramatically reduced. Increased salinity of ground water, salt-water intrusion, heightened saline levels of fresh water lakes may end freshwater fish production in Laguna de Bay…
'the impact on small fishing communities that are almost entirely dependent on diffused but daily fishing activity can spawn serious economic dislocations. This will lead to a new mendicancy and give rise to significant migratory shifts away from affected geographies toward overcrowded population centers…         
'Our farms and industrial infrastructure are vulnerable, as well. Reduced first growth forest coverage, the continued operation of illegal logging, the absence of a working national watershed management program and the lack of a coherent and committed national reforestation program has also reduced water recharge rates essential for growing agricultural, industrial and domestic use. Excessive dependence on groundwater contributes to the problem…”

To meet the threat of environmental risk, Mr. Tan asks, “Will the private sector pass the buck once again to government? Or will business take the reins and steer our country toward a truly sustainable, and profitable, future?”

The Government’s response, through the PTFCC, is apparently an integrated national program that involves significantly reducing greenhouse gas emissions and improving the country’s energy mix in the near future. This, of course, has the businessmen concerned, if not worried. Mitigation strategies at the end of the day will surely impact their bottom lines. Yet, as Secretary Angelo Reyes says, “Scientific studies indicate that as a country, we contribute very little by way of greenhouse gas emissions which give rise to global warming,” If that is so, shouldn’t more attention (without, of course, minimizing the need to go full scale into mitigation efforts) be in protecting ourselves against the adverse effect of climate change?

Take center stage, insurance.  Climate change puts everyone, not just businessmen, at risk of, pardon the expression, being under the weather.  And there is no mechanism for equitable sharing of burden and benefit that is better than insurance. 

Four features of insurance make it a most suitable tool for managing environmental risk.  First, it is able to spread the risk, i.e. it spreads the economic consequences of particular events to a broader group instead of those directly affected by specific events, thereby enabling everyone to engage in activities which they otherwise would have to forego in order to defend themselves against the possibility of injury befalling them.   Second, it is able to segregate risks on the basis of relevant identifying features of the people insured and on that basis charge varying premium rates reflective of the insured exposure to the risk.  In the field of life insurance, just to illustrate, everyone knows that, all other things being equal, the premiums charged on the policy where the insured is a senior citizen are much higher than in one where the insured is a minor.

Third, as a result of this ability to segregate risks, insurance as an industry acts as a passionate advocate for the community’s adoption of risk reduction measures.  The history of insurance attests to this.  The advocacy by the insurance industry of fire prevention methods, for instance, reduced the incidence of fire, resulting in lower fire insurance premiums, all to the benefit of the insuring public.

Finally, since it is to the insurance industry’s benefit that it thoroughly understands the susceptibility of the insured to the risks covered, it has developed the capability to monitor and control the behavior of the community.  This eventually results in mitigating the over-all burden from the risks that do occur.

Expected to provide his expertise on the subject of environmental risk and insurance management are Professor Dan Anderson, head of Environmental Studies of the University of Wisconsin; Dr. Corazon PB Claudio, President of EARTH Institute Asia; and Tony Bainbridge, head of Facultative Casualty, Asia Swiss Re. 

The whole day symposium is slated to be held on 27 November 2007, from 8:00 am to 5:30 pm at the Grand Ballroom of the Hotel Intercontinental Manila in Makati City. Sustainability and urgency will be the themes of the day. Facing the consequences of the inconvenient truth admit of no quick-fixes.  Ningas kugon will not serve us well here.  Neither will procrastination, or, its equivalent, bahala na. 

Like Bob Dylan’s rhyme on the need to face social change, Rey De Dios’s message on the urgency of managing environmental risk is hard to ignore:

“Come gather round, people, wherever you roam; And admit that the waters around you have grown; Accept that, soon, you’ll be drenched to the bone;
If your time, to you, is worth saving; Then, you’d better start   swimming  Or  you’ll   sink   like   a   stone;  For  the times they are a’changin"