Advancing Disaster Risk Financing: PCRIC’s First Visit to the Federated States of Micronesia

Situated in the western Pacific region, the Federated States of Micronesia (FSM) is exposed to the full range of climate change impacts, including typhoons, rising sea levels, and increasingly persistent drought. It was in this regard that the Pacific Catastrophe Risk Insurance Company (PCRIC) recently conducted a country mission facilitated by the Department of Finance & Administration under the leadership of the Hon. Secretary of Finance, Ms. Rose Nakanaga.

Undertaken by the PCRIC CEO, Mr. Aholotu Palu, the mission aimed to engage in a strategic dialogue with the government leadership, particularly the Department of Finance & Administration, the Environment & Emergency Management and the Department of Resource & Development. The discussions focused on building resilience by enhancing FSM’s financial protection against natural disasters through PCRIC’s innovative parametric insurance solutions.

During the mission, several meetings were held with key leaders and officials to discuss PCRIC’s offerings, emphasising the new drought policy and its triggers, which include early action and rapid response payouts. Mr. Palu highlighted the availability of financial resources, including €10 million from the Global Shield Solutions Platform (GSSP) to subsidise premiums for Pacific Island Countries (PICs) and an additional US$1 million from the World Food Programme (WFP) for FSM’s drought policy. He also discussed educational opportunities, such as scholarships and internships planned to rollout in the coming year.

Addressing the leaders, Mr. Palu expressed his delight in offering a product specifically addressing one of FSM’s greatest risks. He emphasised that drought coverage is now a reality, hoping FSM would adopt this policy to ensure immediate cash access for disaster response. The mission also met the Public Utilities Corporation and Telecom, discussing potential policy cover against natural disasters, similar to what was offered and recently concluded with PNG DataCo.

PCRIC’s parametric insurance products now cover tropical cyclones, earthquakes, tsunamis (caused by earthquakes), excess rainfall, and drought. These products are linked to the Loss and Damage (L&D) facility, providing much-needed disaster risk financing support to PICs when most needed.

The PCRIC mission was well received by the government, demonstrating a strong interest in PCRIC’s offerings for drought and typhoon coverage. The mission represents a significant step towards strengthening FSM’s disaster resilience. With PCRIC’s innovative insurance solutions now more accessible, the proactive and strategic stance of FSM’s leadership in enhancing disaster risk management is commendable.

FSM leaders thanked Mr. Palu for the in-person discussions, which greatly improved their understanding of PCRIC’s services for PICs. The government expressed strong support for PCRIC’s offerings, recognising the gap they fill that no private sector entity can match with macro parametric policy cover.

A follow-up meeting is tentatively scheduled for the Forum Economic Ministers Meeting (FEMM) in August in Fiji, where PCRIC, supported by the World Bank, will present preliminary options to Hon. Secretary of Finance, Ms. Rose Nakanaga, for her consideration before making a commitment.