SEADRIF (Southeast Asia Disaster Risk Insurance Facility)
Regional disaster risk insurance facility set up in the late 2010s under the ASEAN+3 framework with the World Bank, whose first policy, in 2021, covered Laos against floods.
SEADRIF (Southeast Asia Disaster Risk Insurance Facility) is a regional disaster risk insurance facility, set up with the World Bank for the countries of Southeast Asia. Laos and Cambodia live with seasonal floods every year and with major floods that can wipe out a finance ministry's budget headroom in a few weeks. SEADRIF is the regional answer to that problem. The facility was launched in 2018 by the finance ministers of ASEAN+3, meaning the Association of Southeast Asian Nations plus China, Japan and South Korea. The World Bank provides technical support, Japan and Singapore co-chair it, and its insurance company is registered in Singapore. It follows the logic of CCRIF (the Caribbean Catastrophe Risk Insurance Facility) and the Pacific facility, with two differences that matter to an underwriter. The main peril is flood, much harder to index than cyclone wind speed or earthquake magnitude. The index relies on satellite mapping of flooded areas and on loss modeling, and the gap between water extent and actual damage is wide. The structure is also more modular than the Caribbean and African pools. It pairs a regional insurance fund for low-income members with an advisory and product platform for wealthier ones, which do not need a pool to buy reinsurance. The first pool was meant to cover Laos and Myanmar against floods. In early 2021, the year of the coup, Myanmar pulled out after failing to pay its premium. The company had to renegotiate its policy and reinsurance in a hurry, and the first sovereign policy, issued in February 2021, covers Laos alone. That is the question every sovereign pool eventually faces: what do you do with a member whose government is no longer recognized by part of the donor community? For reinsurers the volume is still small, and the appeal lies elsewhere. SEADRIF opens access to Asian flood risk with low correlation to the usual books, provided one accepts basis risk that the models cannot yet bring down.
Textbook case, invented figures: a member country buys flood cover based on modeled loss, computed from satellite-observed flood extent across its provinces. It pays 2 million dollars when that loss exceeds 30 million, and up to 10 million above 80 million. A monsoon flood submerges 1,200 square kilometers of rice paddies and the model puts the loss at 55 million. The payout, around 5 million, arrives within weeks, without waiting for the provinces to tally the damage.
SEADRIF, Southeast Asia Disaster Risk Insurance Facility, ASEAN catastrophe pool, SEADRIF Insurance Company
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