Volcanic Risk in Vanuatu: Can Insurance Play a Role?

Out of the six active volcanoes, the Manaro Voui Volcano is currently the most hazardous volcano in Vanuatu and is ranked among the most active in the world. Fiscal planning for volcanic hazards events remains a challenge for the government of Vanuatu, due to the unpredictability of volcanic activity. However, such disaster response activities are very costly and therefore require financial budget planning to consider potential fiscal shocks from volcanic hazards in order to arrange financing in advance.

For example, parametric insurance or forecast-based financing can be an important financing tool in such circumstances. A request from the government of Vanuatu was made to the World Bank for technical assistance provided through the PCRAFI Technical Assistance Program to investigate the possibility of developing catastrophe insurance coverage against volcanic hazards to help the government meet the financing requirements for disaster response.