BY JOHN HOUANIHAU
The Governor of the Central Bank of Solomon Islands (CBSI), Dr. Luke Forau, said the bank is committed to championing innovative solutions, such as parametric insurance, that drive economic stability and help overcome the challenges posed by climate change.
He made this statement at the high-level workshop on Parametric Insurance for Climate Resilience in the Solomon Islands, held Monday this week at the Heritage Park Hotel.
The workshop, hosted and organized by the United Nations Capital Development Fund (UNCDF), UNDP, and CBSI, provided key stakeholders with technical insights into parametric insurance, showcasing its potential to strengthen financial resilience when climate disasters occur.
Speaking at the event, Dr. Forau highlighted that the Solomon Islands is ranked fifth in the world for disaster risk, with an average loss of around 2.5 million U.S. dollars annually.
“This gathering marks the first step in our journey toward a financially resilient, prepared, and secure society. It demonstrates our commitment to building resilience in the Solomon Islands against natural disasters, which are a significant threat to our communities and economy,” said Dr. Forau.
He also extended his gratitude to the organizers and partners.
“Thank you very much to UNCDF, UNDP, and our donor partners—the Australian government, the New Zealand government, and the UK government—for your continued support,” he said.
Dr. Forau emphasized that insurance is an essential tool for safeguarding and strengthening economies while protecting communities from the devastating effects of climate change-related disasters.
“With CBSI playing a supervisory role in the insurance sector, we are building a stronger future for all. The Solomon Islands is one of the most disaster-prone nations on the planet,” he said.
He explained that parametric insurance offers an innovative way of providing financial support quickly.
“Unlike traditional insurance, this is not to discount the critical role that the insurance industry plays in our country, but parametric insurance offers fast and efficient payouts based on predefined weather triggers,” he said.
He added that this mechanism is a game-changer, with quick funds allowing communities to recover rapidly and avoid prolonged financial hardships and instability.
“This highlights the urgency of addressing the gap in disaster risk financing with parametric insurance in our country,” Dr. Forau said.
He pointed out that women, individuals with disabilities, and informal workers are often the most affected by climate shocks. Many lack access to finance and are left vulnerable to frequent cyclones or cycles of poverty exacerbated by natural disasters.
“Parametric insurance can fill this gap by providing immediate financial relief that farmers, market vendors, fishers, and other vulnerable groups can use to rebuild and return to normalcy more quickly. As the regulator of the insurance sector, CBSI has a crucial role in facilitating the transition of parametric insurance from concept to full market deployment,” he said.
“Our priorities align closely with our Third National Financial Inclusion Strategy, which aims to build resilience at the household and community levels by introducing accessible financial instruments,” he added.
Dr. Forau explained that climate response initiatives like parametric insurance meet these criteria and support sustainable economic growth, in line with the country’s objective to promote green financial services.
“Currently, only around 26% of adults in the Solomon Islands have access to formal financial services, such as bank accounts. Parametric insurance presents an opportunity to extend coverage to low-income households and the informal sector.
“Not only does it improve financial inclusion, but it also strengthens the financial security of our people and, consequently, our country,” he said.
Dr. Forau emphasized that CBSI will work with all partners in this initiative to ensure robust regulatory oversight for human protection and empowerment, as well as a transparent ecosystem for parametric insurance.
“Parametric insurance holds the potential to accelerate disaster recovery, reduce financial stress for households and businesses, boost confidence in our financial systems, and increase insurance adoption. I urge all stakeholders in this room to take ownership of this initiative,” Dr. Forau concluded.
