Vietnam joins Southeast Asia’s Disaster Risk Insurance Facility

The Ministry of Finance, acting under the authority of the Government of Vietnam, on February 10 signed the Memorandum of Understanding (MoU) to become the eighth member of the Southeast Asia Disaster Risk Insurance Facility (SEADRIF) 1.

The Mekong Delta Region. Photo: An Hieu

The facility is a regional platform for countries in the Association of Southeast Asian Nations (ASEAN) and China, Japan, and Korea (ASEAN + 3) to work together to strengthen financial resilience against climate and disaster risks in ASEAN.

By joining SEADRIF, Vietnam will have access to regional and international technical and financial solutions to increase financial protection for the country and its population in the face of disaster and climate shocks.

“The Government of Vietnam recognized the growing challenge from disaster and climate risks on the country’s socio-economic development. Strengthening financial preparedness for disaster response and recovery has been among the Government’s priorities in safeguarding the country’s development gains and the well-being of our people,”  said Nguyen Duc Chi, Vice Minister of Finance, representative of Vietnam in the SEADRIF Council of Members.

“Participating in regional and international cooperation mechanisms such as SEADRIF will help Vietnam strengthen its capacity and ability to respond to disaster impacts with new financial instruments. At the same time, Vietnam will play its role as an active and responsible member, together with ASEAN+3 members and development partners, in joint efforts to respond to global and regional disaster risks”, he added.

SEADRIF - the first of its kind in Asia - was established in December 2018 with support from the World Bank and endorsement by the ASEAN+3 Finance Ministers and Central Bank Governors. As a SEADRIF member, Vietnam will be able to jointly design and develop, together with other countries, products, and services that address the country’s challenge in disaster risk financing.

“We welcome the addition of Vietnam as the eighth member of SEADRIF at a critical time when all SEADRIF member countries are stepping up financial preparedness measures to manage the impact of increasing climate and disaster risks. We look forward to working closely with Vietnam as it responds to these risks by utilizing the suite of services and products provided by SEADRIF and plays its part in building a more resilient ASEAN region”, said Masato Kanda, Vice Minister of Finance for International Affairs, Japan Ministry of Finance, as the Co-Chair of the SEADRIF Council of Members.

The SEADRIF membership allows member countries to receive technical support in the areas of protection of government budget, financial protection of public assets, risk modeling and risk management, local insurance markets development, technology, and financial product innovation. Vietnam can also leverage SEADRIF to access international financial markets with a greater economy of scale thanks to risk pooling with other member countries and potential financial support from development partners.

“The World Bank, together with development partners, has been providing technical, financial, and convening support to Vietnam to build the country’s capacity to manage the impacts of climate and disaster shocks. Vietnam’s accession into SEADRIF is an important step to improve the country’s fiscal and financial resilience against disaster and climate risk, which is becoming more important than ever as the country is heading towards a post-COVID-19 green and resilient recovery”, said Carolyn Turk, World Bank Country Director for Vietnam.

With a coastline of over 3,200 kilometers, Vietnam is vulnerable to multiple natural hazards, most notably tropical cyclones, floods, droughts. These disasters have caused significant damage to communities and disrupted critical operations of the economy.

The Government of Vietnam has put in place a range of financial mechanisms for disaster response and recovery including budgetary, non-budgetary, and market-based instruments. However, Vietnam needs more effective tools, especially financial ones in order to cope with the increasing impacts of climate change.