The Philippines is particularly vulnerable to natural disasters and climate-related risks and on average incurs £3.5bn in losses each year because of typhoons and earthquakes.

The programme, which has been developed along with the World Bank and UK Department for International Development, provides $206m in coverage against losses from major typhoons and earthquakes to national government assets as well as to 25 participating provinces. Insurance payouts will be made when pre-defined triggers are met.

Joaquim Levy, managing director and chief financial officer of the World Bank, said: “This new insurance program illustrates how the World Bank Group can leverage capital from the market to help governments receive fast cash injections for emergency response and to sustain essential services in times of crisis, empowering local governments to more effectively assist their citizens.”

Mara Warwick, World Bank country director for the Philippines, added: “This initiative is a major advancement in the Philippines’ efforts to bolster its resilience.

“It demonstrates the global leadership of the country in developing innovative financial solutions to mitigate the financial impacts of extreme climate and weather-related events, as well as major earthquakes.”

The scheme is the first of its kind in the Philippines and builds on six years of partnership with the World Bank. It represents the first time the bank has entered into a reinsurance agreement with a government agency as well as the first time it is executing a catastrophe risk transaction in local currency.

Under the scheme, a government-owned insurance agency provides cover to the national government and provinces.

The World Bank’s International Bank for Reconstruction and Development then acts as intermediary, transferring risk to a panel of international reinsurers, which includes Nephila, Swiss Re, Munich Re and Axa.