The Pacific region has low insurance penetration compared with other parts of the world. General (non-life) insurance penetration for Pacific countries ranged between 0.5% (Indonesia) and 2.5% (Samoa) in 2012. The mean penetration rate for Pacific countries for which data could be obtained was 1.6%, which is considerably less than the rate in Australia (2.2%), half the rate of the European Union (3.1%), and about one-quarter the rate of the USA (6.0%).
This paper explores insurance penetration and the challenges to insurance uptake in the region. Particularly significant barriers include affordability, inadequate disaster risk mitigation measures, insufficient baseline information for designing insurance products, limited availability of reinsurance, consumer awareness and cultural issues, lack of trust, inadequate building codes and certification mechanisms, lack of public asset registers, aid dependence, and weak mechanisms for distributing pay-outs.
The paper also identifies approaches to broadening insurance coverage, providing selected examples of disaster risk insurance programmes. For example, the Caribbean Catastrophic Risk Insurance Facility was the first multi-national parametric catastrophe insurance instrument established in 2007. In addition, programmes such as the Pacific Catastrophe Risk Insurance Pilot and African Risk Capacity show evidence that they are also broadening coverage and distributing compensation for insured risks successfully.