Discussions began on Tuesday on whether the Philippines would benefit from mandatory disaster-risk insurance for all local government units (LGUs) as an effective tool to improve the country’s resilience against disasters.

Participants exchanged views at a high-level forum on strengthening disaster-risk insurance in the Philippines held at the Senate multipurpose hall and organized by Sen. Loren Legarda and the United Nations Office for Disaster Risk Reduction (UNISDR), which, organizers said, would be the first of an ongoing debate on the proposal.

Global reinsurance broker Willis RE and Munich RE insurance group proposed the “Philippines Risk Insurance Scheme for Municipalities [Prism]” or a catastrophe-risk insurance platform for the Philippines.

“It is a multiperil scheme that is ready to be implemented by June 1, 2014, consistent with current, proposed and potential catastrophe-insurance requirements and developments. Prism is based on tried and tested principles and provides a flexible robust foundation for future initiatives,” Prism proponents said in their presentation.

A similar scheme is already in place in Mexico, Turkey and some Caribbean states.

Under the proposal, Prism will take the form of a special purpose vehicle, with the managing board chaired by the Government Service Insurance System (GSIS) with representatives from government and the local insurance industry.

Senators who attended the forum—Legarda and Senate President Franklin Drilon—both said the proposal is worth considering but should be subject to careful study.

Drilon said in his speech at the forum that while insurance, as a risk-management tool, “would protect individuals and communities from financial suffering in the aftermath of natural disasters…it is not a silver bullet for risk management and risk reduction.”

“We need to ask the question: In our investing environment, is it the best course of action in terms of cost effectiveness and affordability? Disaster-risk insurance is something that is new to many of us. Therefore, we must carefully examine this from the point of view of policy-makers,” he said.

Drilon said there are existing regulations that require the insurance coverage of all government buildings under the GSIS Act, while agricultural losses are supposed to be insured through the Philippine Crop Insurance Corp.

“The disaster-risk insurance could have a wider coverage, but I am not yet prepared to endorse that concept because of the financial burden involved and other issues which we must examine carefully before we go into it,” the Senate President said in an interview with reporters after the forum.

He said that while the scheme is under study, the government can move to strengthen disaster mitigation by  “enforcing the policies and the law on insuring all government buildings and insuring the agricultural sector against losses arising from natural disasters.”

Legarda said the proposal is worth exploring and worth studying to see whether we are ready for it and we will actually benefit from it.”

In her speech at the forum, Legarda, chairman of the Senate Committees on Environment and Climate Change, said there is a link between disasters and poverty.

“Despite our impressive economic growth, our poverty incidence hardly changed. Poverty and inequalities worsen as natural hazards and climate change constantly affect the poor and keep them trapped in a vicious cycle of risk and poverty,” she said.