The Philippines is being urged to reform its insurance sector by introducing mandatory home coverage for businesses and incentivising disaster-resilient construction, according to the Organisation for Economic Co-operation and Development (OECD). The Paris-based body warned that the country faces a “massive protection gap” in the wake of increasing climate-related risks, underscoring its status as one of the world’s most vulnerable nations to natural disasters.
The OECD highlighted a stark imbalance in the Philippine insurance market. While microinsurance schemes have gained ground in life insurance and third-party motor vehicle coverage, residential properties remain largely unprotected against extreme weather events such as typhoons, floods, and earthquakes.
“Microinsurance has been successfully deployed, but mostly for life insurance and third-party motor vehicles, leaving homes largely unprotected against extreme weather events and natural disasters,” the OECD report noted.
Currently, mandatory coverage exists primarily for mortgaged properties, leaving a significant proportion of households and businesses exposed. OECD data indicate that only a small fraction of Filipinos carry home insurance, and even fewer possess policies that cover natural hazards.
To address this shortfall, the OECD has recommended introducing mandatory home insurance for businesses, a measure that could extend coverage to a broader segment of households and firms, help spread risks, and potentially lower premiums.
“A potentially significant reform would be to make home insurance mandatory in the Philippines, as it is in a few other countries, thus reaching a larger pool of households and firms, dispersing risks and helping to reduce premiums,” the organisation said.
The OECD further proposed leveraging public–private partnerships (PPPs) to expand home insurance coverage, encourage the development of reinsurance markets, and make policies more affordable for vulnerable communities. Recognising that low-income households are particularly susceptible to property losses, the organisation suggested combining mandatory coverage with targeted subsidies.
“A dedicated fund to subsidise premiums for low-income households could ensure that home insurance remains accessible and affordable,” the OECD added.
The OECD report emphasised that broadening property insurance is not only a matter of financial security but also a critical step in enhancing national resilience to climate-induced disasters. It recommended policies that incentivise climate-resilient construction, alongside mandatory insurance, to mitigate long-term risks to both households and businesses.
Key OECD Recommendations for Philippine Home Insurance
| Recommendation | Objective | Target Group | Potential Impact |
|---|---|---|---|
| Mandatory home insurance for businesses | Expand coverage | Businesses & households | Risk dispersion, lower premiums |
| Public–private partnerships | Encourage reinsurance & private investment | Insurers & government | Affordable policies for vulnerable households |
| Premium subsidies | Ensure affordability | Low-income households | Increased insurance uptake |
| Incentivise disaster-resilient construction | Reduce damage costs | Builders & homeowners | Long-term risk reduction |
With the Philippines facing an increasingly volatile climate, the OECD warns that urgent reforms in property insurance are essential to protect lives, livelihoods, and economic stability.