The Tuvalu experience

Tuvalu, a relatively unknown nation, has been in the news a lot this last month, as the Pacific Island Forum 2019 was held there. It got me thinking about my trip there during February 2018, when I worked with the Tuvalu Government (the Department of Climate Change Policy & Disaster Coordination Unit).

Back in February 2018, I found myself on the island of Funafuti, one of nine islands that make up the small pacific island nation of Tuvalu. Situated about half-way between Australia and Hawaii, Tuvalu is the world’s least visited place (approximately 2,000 tourists per year). It is the world’s second smallest independent nation by population (just over 11,000) and fourth smallest by area (just 26km2). So, what brought me to this amazing place which, honestly, I had never heard of just 12 months previously?

Through my work, I was invited to participate in the Pacific Regional Dialogue on Financial Management of Climate Risks in Apia, Samoa, in March 2017. Tuvalu was taking a lead role in the dialogue, in collaboration with the United Nations Development Programme (UNDP) and Secretariat of the Pacific Regional Environment Programme (SPREP). Tuvalu – which I later discovered to be a leading, but until relatively recently under-reported, voice on the matter of global climate change – is particularly at risk from the effects of climate change given its remote location and that it is no more than 4.5 metres above sea level.

During the conference in Apia, I met with the delegation from Tuvalu. I had been inspired by their presentations on the challenges arising from global climate change and by their calls to develop a Pacific Islands Climate Change Insurance Facility (PICCIF). I was also given an insight to the initiatives being driven by Tuvalu, not only to raise awareness of the threat of climate change to the Pacific island nations, but also to their work to make Tuvalu more resilient.

What impressed me was that a nation with very few resources and a very small population was determined to be as self-sufficient as possible in making themselves as resilient as possible. A key part of their work is building financial strength to help them to recover – and critically to ‘build-back-better’ – following a natural disaster. One of the key risks for Tuvalu is Cyclone, which they experienced first-hand in March 2015 with Tropical Cyclone Pam. This Cyclone caused AU$ 14m of damage, equivalent to just over 25% of Tuvalu’s GDP.

Tuvalu currently has no insurance industry. It pursues a self-insurance approach through a unique country-owned and driven mechanism called the Tuvalu Survival Fund (TSF). I was invited to work with the Tuvalu Government (the Department of Climate Change Policy & Disaster Coordination Unit) to help them to develop a TSF payout methodology for residents who suffer a property loss. This gave me the wonderful opportunity to spend a week working in Funafuti to better understand the challenges faced by Tuvalu. The key challenges are resources and information.

Working with their Public Works Department, the Tuvalu Government has produced an impressive database of all properties, including details such as property structure, construction materials and location. This has been an intensive manual exercise requiring government representatives to visit as many properties as possible. From my experience with reinsurance, the information produced is at least on a par with, if not better than, that produced by many established insurance companies. This clearly shows Tuvalu’s determination to drive and manage a solution themselves.

The property database enabled us to we produce a TSF payout methodology based on:

A scoring system based on building construction, type, condition and valuation.

A damage factor assessment, with payout priorities and adjustments estimated to take account of social need & inflation, in order to ensure a fair, reasonable and timely payout.

A resilience factor to provide additional assistance for lower grade properties to support the core concept of “build-back-better”.

An adjustment factor to take account of the amount of funds available to the TSF at any one time.


The key lessons learned from the development of the TSF payout methodology included:

The TSF can respond to property losses arising from natural catastrophes and slow-onset climate change impacts, but it does not, and is not designed, to have the capacity to provide full indemnity protection.

A human sanity-check is required, with appropriate authority levels, to ensure that payouts are as fair, reasonable and practical as possible.

The methodology needs to be regularly tested against Probable Maximum Loss (PML) scenarios – estimates of maximum losses that might be experienced as a result of large-scale events – to check its effectiveness and practicality.

The methodology must have the flexibility to evolve as more data regarding properties and potential losses is captured.

An emerging finding was the possibility for future methodologies to incorporate non-property losses (e.g. business and livelihood losses).

The work is clearly ongoing and is testament to Tuvalu’s resolve to manage their own destiny as far as possible. Another clear indicator of this determination is the lead role that Tuvalu is taking in promoting the development of a Pacific Islands Climate Change Insurance Facility (PICCIF). This is a considerable undertaking as we need to think beyond traditional insurance and reinsurance principles to meet emerging challenges, such as providing compensation for:

Loss of land due to gradual sea-level rises;

Loss of land productivity due to salt-water contamination from rising sea levels;

Loss of fishing stock due to the effects of warming sea water, sea water acidification and damage to or loss of coral reefs;

Loss of livelihoods and culture should climate change effects lead to population migration.


A traditional response has been that such circumstances are uninsurable. However, this is not deterring Tuvalu and there are signs that people and businesses are becoming more willing to try and develop new solutions. I believe that the insurance and reinsurance industry have a key role to play in developing such solutions. Whilst the challenges appear to fall outside of the traditional principles of insurance and reinsurance, challenges are the growth engines of these industries and must be embraced as such. Furthermore, these climate-change challenges are too important and serious to ignore and adopt a “someone else’s problem” mentality.

Tuvalu, along with other Pacific Island Nations, is in the front-line of climate-change impact. We must not and cannot afford to turn a blind eye to their everyday experience from this growing threat. I greatly admire their work and tenacity because they are not simply appealing for help, they are leading the way by example. It might be a small nation, but Tuvalu has a very big heart and a fierce determination not simply to survive, but to be resilient and to grow stronger.

Author: Gabriel Manoughian