Southeast Asia Disaster Risk Insurance Facility PROTECT THE GREATEST HOME OF ALL: OUR COUNTRIES SEADRIF is a regional platform to provide ASEAN countries with financial solutions and technical advice to increase their financial resilience to climate and disaster risks.
Policy, Institutional and Regulatory Requirements Facilitator: Benedikt Signer Speakers: Rob Antich, Australia | Heddy Pritasa, Indonesia | Greg Fowler, New Zealand 2
Objectives of the factsheets and webinar Why should governments develop a financial protection strategy for public assets? INTENDED OUTCOME: Government officials to When can insurance be a good option for the develop strong financial protection of public assets? understanding of the steps Who are the key stakeholders (both external and required to design, develop, internal) that play roles in each stage of the deliver and operate effective financial protection of public insurance development process? assets, particularly through What are the most important step-by-step risk transfer and insurance considerations involved in the development of a strategy for public asset insurance? 3
Structure of Webinars 90 minute webinar for Poll results will be included Different guest speakers each factsheet in final outputs Live polls: Please share questions Please participate via Q&A function 4
Overview of the Knowledge Series Development of an implementation roadmap for a Roles and responsibilities for the government officials within an public asset financial protection program internal insurance program, the associated stakeholders, including auditing, compliance and governance, supervisory. How governments can agree objectives and build consensus around priorities Multi year aspects such as renewals and re-assessment of exposures. How to develop internal governance and oversight functions, and ownership at each level of the Review of procurement considerations insurance program Dealing with claims management Policy, How risks are allocated across asset owners and Incorporating innovations and technologies Operations Institutions operators and and Management Regulations FACTSHEETS 7 and 8 FACTSHEETS 1 and 2 Access to Data, The importance and development of Public Assets Roles and options available to construction Information domestic Registries, and associated Enterprise Asset of cost-effective insurance, including common insurance and and Management systems. structures and case studies, their Analytics international pros and cons against considerations of How to assess and quantify asset exposure, sources markets budgets, risk appetites, and government priorities of data, requirements for insurance transactions Introduction of pooling and mutualization of Introductions to the use of catastrophe analytics, large scale public assets insurance programs burning cost / technical and market rates, tariff structures, risk based pricing methods, and Insurance/reinsurance concepts of retention, deductible underwriting. and exclusion FACTSHEETS 5 and 6 FACTSHEETS 3 and 4
What was the last webinar about? POLL (1): Roadmap to develop a public asset financial protection program WARM-UP Data and information needs for a public asset financial protection program I did not attend the previous webinar(s) – this is my first time It was too boring, I don’t remember 6
Policy, Institutional and Regulatory Requirements Rob Antich Former Australian Government official Consultant, Crisis and Disaster Risk Finance, World Bank 7
Public Asset Insurance Program What is the program’s financial structure? How will the program work? Why is there a need? Budget and Financial Strategic alignment Legitimacy planning (1) Policy design (2) Program design (4) Financial parameters How will the program align How will the program work? How much will participants with the government’s overall Who will it apply to? have to contribute in risk management strategies What are the obligations on premiums? (contribution levels) and objectives? program participants and the How are surplus contributions What does the program program manager? accumulated over financial cover? What are the What governance and years? (accumulation levels) priorities? regulatory mechanisms? At what levels should Where should the program accumulated funds be capped, be located? relative to claims and costs? (funding ratios) (3) Legislative process Will the funds be formally How will it be set up? separated from government What institutional frameworks accounts? and tools are available to Will the funds be invested and establish and support the if so, what will be the program? investment strategy? 8
Public Asset Insurance Program timeline 1) 2) 3) Legitimacy - design Strategic alignment Legitimacy - legislative (1-2 years) (1-2 years) (1-2 years) Public Asset Insurance Program Legislation Stakeholder Participation Legislative Regulation consultation Governance Policy design Program design Ministerial direction and agreement Location processes Rules Financial By-laws parameters 9
1) Strategic alignment — Core objectives: Fiscal and risk management Policy design Protect balance sheet Improve economic resilience to external shocks Strategic alignment with risk management Improve financial management of government assets Improve understanding of overall government challenges Complementary objectives Economic/social resilience Efficient risk and cost allocation 10
Invest time and effort to engage stakeholders to clarify the key 1) Strategic program objectives, principles and scope. alignment — Policy design Key stakeholders: Following the consultation process, Governments need to: across government - priority stakeholders include key financial decide on the key drivers, government agencies (Ministry of objectives and principles of the Finance/Treasury) and program Economic Fiscal and departments or agencies risk growth and understand the choices and responsible for infrastructure and management social trade-offs that are being made – social service delivery resilience what the priorities are, what the Efficient subnational governments - program is expected to do and resource allocation especially in relation to any what it will not do proposed/potential changes in communicate its decision to disaster risk and cost allocation stakeholders to set and limit settings, and expectations about the program the financial/insurance industry and its objectives, and Policy design and community groups - to consider how the program will be account for wider technical and implemented . on-the-ground support mechanisms. 11
Which policy objective do you consider is the most important in relation to developing a public asset insurance program? POLL (2): Improving economic resilience to external shocks POLICY OBJECTIVES Improving the government’s balance sheet Improving the financial management of significant government assets Improving social resilience and reducing poverty More efficient allocation of expenditure for disaster relief and recovery 12
2) Legitimacy — Program Design Governance Program participation Parliamentary Mandatory vs. Governmental voluntary External audit Phased on-boarding Internal Program obligations Risk management Organizational set-up Data sharing 13
Program participation – voluntary vs. mandatory Mandatory Voluntary Encouraged to participate Government O P T I O N AL Corporations Increased autonomy Economies of scale Expected to participate Less adverse selection risk Customised approach Crown (i.e. must explore the option) Entities More accurate forecasting Competition C O N D I T I O N AL LY O P T I O N AL Increased transparency • Increased information Fewer economies of scale • Adverse selection risk Central Required to participate • • Less predictable One size fits all government (i.e. must apply for an • forecasting Loss of agency control exemption) agencies • Fewer incentives M AN D ATO RY 14
Program obligations Represent Comply with agencies to laws, policies market and and ensure instructions ongoing and incl. risk effective risk management transfer Participants Program manager Duty of care to take all Good faith reasonable steps Full and timely information SLAs and KPIs disclosure 15
Governance of a Public Assets Financial Protection Program Internal governance External audits Government review Ministerial oversight – meetings/reports Audit Committee oversight External audits by private sector Periodic independent review of the Internal review program’s objectives, roles, functions Stakeholder advisory committees and performance to test whether the program remains fit for its purpose. Consider purpose of committee, powers, meeting frequency, reporting and resources required Parliamentary scrutiny Parliamentary scrutiny of program performance Annual reports tabled in Parliament Regular attendance before Parliamentary committees Auditor-General review of financial reports and occasional audits Typically every 3 – 5 years Regular points in a financial year Typically once every financial year 16
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