The Central Bank of Samoa (CBS) has expressed support for the introduction of parametric insurance as a proactive way to strengthen the resilience of the country’s climate-vulnerable communities against natural hazards.

The UN Capital Development Fund (UNCDF), UN Office for Disaster Risk Reduction (UNDRR), and UN Development Programme (UNDP) recently held consultations with local groups and public and private sector representatives to better understand their disaster financing needs.

The consultation was in preparation for the launch of tailored anticipatory action insurance solutions that enhance community resilience and preparedness against natural hazards in Samoa.

Central Bank Governor Maiava Atalina Emma Ainuu-Enari has welcomed the initiative, stating that the product would be a progressive addition to Samoa’s emerging insurance market, and provide policyholders with a means to financially protect their assets and livelihoods.

In 2023, UNCDF, in partnership with Samoa Surety and Tower Insurance, launched a parametric insurance product for farmers, fishers and market vendors in Samoa covering cyclonic events.

“The product is structured so that policyholders can be assured of financial protection, while also having a clear understanding of the potential payouts they can expect. This process is designed to be as efficient and timely as possible following a climate or weather event, ensuring that recovery and rehabilitation efforts can begin without undue delay,” Governor Ainuu-Enari said.

The community groups identified tropical cyclones, floods, and droughts as the major hazardous events impacting their well-being, leading to food and water shortages and the displacement of people.

The lack of financial coping tools, such as climate insurance, compounds these risks and the participants emphasised the need for better awareness and access to climate insurance products.

Parametric insurance provides swift payouts based on pre-agreed triggers, like rainfall or wind speed, and the quick access to financial relief helps affected communities recover faster after climate disasters.

Samoa’s climate-vulnerable and largely insurance-excluded communities now have access to an affordable disaster risk finance tool that supports rapid post-disaster recovery.

The anticipatory action insurance scheme will complement the existing suite of climate and disaster risk insurance solutions available in the market.

“This is a clear example of product design that ticks all the right boxes and addresses the urgent need in the market to have tools to respond better to climatic events,” Governor Ainuu-Enari said.

Community Consultations

The consultations with local groups aimed to identify the most impactful hazardous events, coping mechanisms and their pre- and post-disaster needs.

Those consulted included women’s groups, the Samoa Farmers Association, and disability advocacy organization - Nuanua O Le Alofa (NOLA) in Upolu and Savai’i.

Participants confirmed that tropical cyclones, floods, and droughts were the key threats, which were consistent with the findings from UNCDF’s Demand and Supply Study Report on Climate and Disaster Risk Financing and Insurance in Samoa.

Persons with disabilities face unique challenges during disasters, including difficulties accessing evacuation centers, lack of accommodative infrastructure, lack of assistive devices, and vulnerability to mistreatment in shelters.

A common theme among participants was the need for financial resources both before and after a disaster to strengthen coping mechanisms and improve recovery prospects.

A lack of coping mechanisms was also identified as a ‘high risk’ factor for Samoa in the 2021 World Risk Report.

Anticipatory Action

To broaden the protection net, UNCDF and UNDRR are introducing an innovation in Samoa that takes an anticipatory approach to disaster risk reduction.

UNDRR defines anticipatory action (AA) as a form of disaster risk management that involves taking steps before a predicted hazardous event occurs to prevent or reduce its impact.

The two UN agencies have pooled their resources, technical expertise, and public-private sector reach to develop a parametric insurance product that incorporates a proactive approach to disaster risk reduction, linked to anticipatory action.

“AA is another example of meaningful innovation and product design that aids to support economic and wealth resilience by allowing access to the necessary means to protect assets and livelihood prior to the arrival of a climate event,” the Governor said.

The product is triggered by early warning systems and responds to the growing regional and global demand for solutions that provide financial resources before a disaster strikes to strengthen community resilience and mitigate the worst losses.

Governor Ainuu-Enari described the proposed product as a strong fit with the National Financial Inclusion Strategy of Samoa as well as CBS policies and strategies.

“I see AA aligning very well with the CHOGM 2024 theme, and I emphasize the transformational nature of this frontier initiative. I hope to see more such innovative products to protect people’s wealth and increase their resilience,” she added.

Sheldon Chanel is the Communications Lead for  UNCDF Pacifi) and Akata Taito is the Inclusive Insurance Coordinator for UNCDF Pacific.