The United Nations and Samoa Surety Insurance (SSI) briefed the Central Bank of Samoa (CBS) about today's launch of two new innovative climate insurance solutions designed to strengthen the resilience of Samoan communities against natural hazards.

The first product provides financial protection against cyclones, earthquakes, excess rainfall and water deficit/drought, alongside cover for funeral, term life, personal accident, house fire, and hospital stays.

The second is a pilot anticipatory action parametric insurance solution, which pays out a portion of the total sum insured 24-48 hours before a disaster strikes, based on early warning triggers that are determined in advance.

The central bank is a key stakeholder in Samoa's insurance industry as the primary regulator and supervisor of the financial sector.

It also plays a decisive role in approving new innovations in the insurance market and, under the Insurance Act 2007, is responsible for licensing and overseeing insurance companies, brokers, and agents operating in Samoa.

Teams from the UN Capital Development Fund (UNCDF), UN Development Programme (UNDP), SSI and Pacific Reinsurance (Pacific Re) briefed the bank about the unique features of the product and how it can support the resilience of Samoan communities. 

Parametric insurance products provide rapid payouts following natural hazards, as losses do not need to be verified, and payments are based on 'trigger' events determined before the policy is signed. 

For example, if a cyclone wind speed exceeds a certain threshold, a pre-agreed payout is automatically disbursed to insured Samoan families within days and without any requirement to prove the nature and cost of the losses.

"Vulnerable populations often face an urgent cash shortfall post-hazard which can push vulnerable communities further into financial hardship," said Akata Taito, UNCDF's Inclusive Insurance Solutions Lead.

"Parametric insurance is an affordable and accessible way to deliver rapid payouts to households and communities impacted by extreme weather events."

There was a strong focus on reinsurance - also known as insurance for insurance companies - during the discussions. 

Samoa faces disproportionate climate risks despite contributing minimally to global emissions.

While the speed of parametric payouts is a game-changer for resilience, it also means insurers face immediate demands after each event to provide cash payments.

This is where reinsurance comes to absorb excess risk and enable insurers like SSI to offer these innovative products at affordable rates and reduce financial volatility. 

SSI is exploring a partnership with Pacific Re, a Papua New Guinea based company with clients across the region, including in Micronesia, Timor Leste and New Zealand. 

The CEO of Pacific Re, Lolesh Sharma, who is in Apia for the launch, said: "Pacific Re is providing reinsurance support to SSI for their parametric products, which is a relatively new concept in insurance, and we are vital partners in protecting the insurer against largescale losses."

UNCDF and UNDP have convened a range of likeminded private and public sector partners, like SSI, CBS and Pacific Re, in an ecosystem that allows them to design and deliver solutions like parametric insurance to support communities and advance the SDG agenda

According to the UN's Ms Taito, the new products would not have been developed without the partnerships between the private and public sector.

"With these new bundled and anticipatory products, I’m confident Samoan communities will be better equipped to withstand and recover swiftly from natural hazards," she said.