Mexico touts plan for global catastrophe fund
Source: Reuters
By Gilbert Le Gras
SYDNEY, Nov 20 (Reuters) - A Mexican proposal for a global fund to help developing countries cope with the costs of natural disasters is getting a good reception from leaders in other parts of the world, Mexico's finance chief said on Monday.
Finance Minister Francisco Gil Diaz told Reuters in an interview that a catastrophic reinsurance fund, which Mexico proposes could be managed by the World Bank, would help countries cope with the costs of hurricanes, earthquakes and flashfloods.
"We've had a good response already from Asia and Europe as well as the World Bank itself," said Gil, speaking on the sidelines of a Bank for International Settlements meeting in Sydney.
Insurance premiums in Mexico spiked 30 to 200 percent in the wake of 2005's devastating Hurricane Wilma because many reinsurers, companies that insure insurance firms' liabilities, shunned new Mexican contracts, Mexican Undersecretary of Finance Alonso Garcia added.
Wilma was just one of three hurricanes to strike Mexico last year that ranked among the six worst hurricanes to pound the nation of 100 million people in its recorded history, he said.
Mexico's proposal would see countries from typhoon-prone Bangladesh and the Philippines to countries on major fault lines such as Chile and Mexico opt for a World Bank-managed reinsurance fund by paying a surcharge on private insurance contracts.
"This fund would make insurance more prevalent in these countries," Garcia said. "If we had this fund and we could smoothe the cost, then we could have insurance become more common and protect larger populations."
A World Bank study found that under the proposed scheme private insurance premiums would fall about 50 percent, he said.
Such savings would be of particular appeal to lower-income countries vulnerable to natural disasters, Garcia said, citing Hurricane Mitch which wiped out 40 percent of the Honduras economy.
Areas that see a high frequency of earthquakes or hurricanes, such as California or Florida, have decreasing access to reinsurance policies so in the case of the United States the federal government has had to step in to fill that void, Gil said.
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