A new regional analysis released by the ASEAN Secretariat has raised concerns about the pace and consistency of disaster risk financing and insurance (DRFI) adoption across Southeast Asia.
As the region confronts increasingly frequent and severe natural disasters, the report calls for coordinated efforts to strengthen financial resilience and risk transfer mechanisms.
The publication, “Disaster Risk Financing and Insurance in Southeast Asia: Trends, Challenges, and Strategic Approaches,” provided a comparative overview of DRFI efforts by ASEAN Member States (AMS), highlighting gaps in policy frameworks, implementation, and insurance market engagement.
The report outlined significant variation in the use of DRFI instruments across the region. Indonesia and the Philippines have made substantial progress in developing layered financial protection strategies.
Indonesia has created a national pooling fund, deployed reinsurance for public assets, and established subsidy programs for crop and livestock coverage.
The Philippines has tapped capital markets via catastrophe bonds and implemented parametric insurance for disaster relief.
Other countries, including Brunei and Cambodia, have remained focused on building basic institutional capacity for disaster management.
Cambodia’s disaster planning is hampered by limited fiscal resources and technical support, while Brunei, though institutionally organised, lacks dedicated DRFI programs.
Across most AMS, insurance penetration rates remain below 10%, which the report attributed to several structural challenges, including low income levels, limited public financial literacy, and underdeveloped insurance distribution channels. Even in countries with relatively higher per capita income – such as Brunei – insurance uptake remains low.
Social protection systems also vary widely in coverage. Thailand and Singapore are among the few with broad non-health safety nets, while countries like Myanmar and Cambodia report coverage levels below 10%, leaving large portions of their populations financially exposed after disasters.
The report identified significant pressure on agricultural and aquaculture insurance programs due to high loss ratios.
In Indonesia, loss ratios for livestock insurance have exceeded 100%, and similar patterns have emerged in aquaculture schemes, some of which were suspended during the COVID-19 pandemic due to budget reallocations and unsustainable claims volumes. Vietnam and the Philippines have reported comparable difficulties.
The report pointed to structural issues such as adverse selection and lack of participation by lower-risk policyholders, which distort the risk pool and elevate premium loss ratios.
In a separate climate risk analysis, WTW examined the 2024 South Asian monsoon season and described the resulting floods as a significant case of systemic underinsurance.
Heavy rains led to crop damage, infrastructure failures, and energy disruptions across countries including India, Nepal, Bangladesh, and Pakistan.
Bangladesh alone estimated agricultural losses at US$380 million, primarily in rice production. Infrastructure in Nepal was severely impacted by landslides that cut off road access to Kathmandu, while Pakistan reported damage to hundreds of kilometres of roadways and dozens of bridges. Hydropower capacity was also constrained due to facility shutdowns in flood-hit areas.
WTW reported that more than 80% of economic losses from the event were uninsured, highlighting the region’s exposure to climate volatility without sufficient financial buffers.
To address these risks, the ASEAN Secretariat recommended enhanced regional collaboration through platforms such as the ADRFI and SEADRIF.
The report calls for wider adoption of risk-layered financing approaches, investment in microinsurance expansion, and greater integration of insurance into national risk reduction plans.
It also suggested aligning with international practices such as adaptive social protection schemes and natural capital preservation policies, while encouraging AMS to view financial literacy development as a strategic priority for long-term resilience.
