Marking a shift in disaster financing, the government of the Lao People’s Democratic Republic has partnered with SEADRIF Insurance Company on a sovereign risk policy that introduces the world’s first impact-based trigger at a national level.
The two-year policy offers up to US$16 million in coverage for multiple perils, including floods, tropical cyclones, earthquakes, and landslides. Unlike traditional insurance models that rely on hazard measurements or modelled losses, this policy activates based on the number of people affected by disasters. The trigger data will be sourced from the National Disaster Management Office (NDMO), using an independent and legally recognised reporting framework.
The mechanism ensures that once pre-agreed thresholds are crossed, payouts are made within 10 business days. This approach is expected to speed up response and recovery by embedding insurance within existing government procedures. Lao PDR has previously received US$4.5 million in fast disbursing payouts since joining SEADRIF in 2021.
“This is the kind of product governments have been asking for – grounded in their own disaster experience, easy to understand, and fast when it’s needed most,” said Benedikt Signer, executive director of SEADRIF Insurance Company. “It’s also a chance to learn together – testing and refining future insurance solutions that meet both government needs and expand what is possible in the market.”
The policy is financially supported by the World Bank, through the Global Shield Financing Facility and the Risk Finance Umbrella Multi-Donor Trust Fund. All payout funds will be allocated according to a contingency plan that adheres to the World Bank’s Environmental and Social Framework.
“With a changing climate and continued deforestation, Laos is becoming increasingly vulnerable to flooding. Access to quick and reliable financing after disasters is therefore extremely valuable,” said Alex Kremer, World Bank country manager for the Lao PDR.
“This milestone represents not only a significant achievement for SEADRIF but also an advancement in parametric insurance products,” said Yoshihiro Kawai, director of SEADRIF Initiative.
The agreement aims to serve as a reference for other ASEAN countries seeking scalable and context-specific disaster risk financing tools.
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