Remittances Are Insurance for Typhoon-Ravaged Philippinesby
While Super Typhoon Haiyan struck the Philippines with a murderous rage that left up to 10,000 dead, the storm wasn’t a “significant” event in insurance term. Look at images of the devastation—the splintered wood, piles of flip flops, corrugated metal—and you see why. The province of Leyte, and its capital Tacloban City, aren’t global commerce hubs. The people here rely on fishing and farming. It’s one of the poorest regions in a country that just recently was deemed investment grade by the three major rating agencies.
While the human toll of Haiyan (or Yolanda, as the Filipinos call it) is already high, the financial toll to insurers is likely to be small. Even if the storm costs $14 billion, as Kinetic Analysis estimates, only $2 billion is likely to be covered by insurance. Even $2 billion in payouts could be optimistic, as the Insurance Information Institute (III) says the Philippines is home to “dozens of tiny and under-capitalized firms.” As a result, III notes, the percentage of people owning policies has actually dropped.
So where does that leave survivors? In need of foreign and federal aid, obviously. But another source is likely to help, too: remittances. Filipinos sent home $1.8 billion in September, according to Barclays, up 8.2 percent from a year earlier. Some 10.5 million Filipinos now work abroad and often send home money every month. That’s about one-10th the country’s population, which may explain why one of the first forms of relief was free overseas phone calls. Already, expats have tapped their networks to raise funds for the disaster relief. Bayanihan Council, an association of 55 Filipino groups in the United Arab Emirates, sent a few thousand dollars over the weekend. Groups from Winnipeg to Hong Kong are doing the same thing.
While they may lack the heft and know-how to rebuild cities flattened by the storm, this reaction demonstrates the strong ties that Filipinos have to their home country. Remittances account for almost 10 percent of the Philippines GDP. In a crisis like this, they’re less likely to be concerned with keeping their losses low. They want to know how much more they can do.