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Boosting Financial Resilience
to Disaster Shocks
EU External Cooperation INFOPOINT
Brussels
May 3, 2019
Olivier MahulPractice ManagerCrisis & Disaster Risk Finance
World Bank
1
Disasters threaten public finances and poverty reduction
Global economic losses from disasters are on average more than US$300 billion a year
This increases by 60% to US$520 billion when estimating global consumption loss.
Disasters force26 million people into poverty every year
Australia: $5bn+2010/11 Queensland
Floods (infrastructure)
China: $130bn+2008 Sichuan Earthquake Japan: $300bn+
2011 Tohoku Earthquake and Tsunami
US: $125bn+2017 Hurricane Harvey
Chile: 20%GDP2010 Earthquake
New Zealand: 20%GDP2010 Earthquake
US: $125bn+2005 Hurricane Katrina
Mexico: $2bn+2017 Earthquake
Indonesia: $1bn+2018 Earthquake
& Tsunami
2
Building a comprehensive approach to resilience
Physical Resilience
Reduce risk and prevent disasterse.g. quality infrastructure
Social Resilience
FinancialResilience Core Mandate of Finance Ministers
Pre-arranged predictable funding when disasters strike to protect the fiscal balance, subnational governments, households, and businesses
Help households and society cope with shockse.g. shock responsive social safety nets
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DRF Core Principles
Timeliness of Funding
Speed matters but not all resources are needed at once.
Disbursement of Funds
How money reaches beneficiaries is as important as where it comes from.
ReliefRecovery
Reconstruction
Disaster Risk Layering
No single financial instrument can address all risk.
Data & Analytics
Sound financial decisions require the right financial information and data.
Market Based Instruments
Contingent Financing
Budgetary Instruments
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World Bank’s Crisis & Disaster Risk Finance unit
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EU-WB partnership on DRF
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1. 2. 3.
DRF Analytics
• Supports increased financial resilience of countries by enabling access to information and products through innovative analytics
• Bridges the gap between risk data and informed sovereign DRF decision-making
Africa DRF Initiative
Catalyzes the uptake of innovative risk identification, assessment and financing tools within the development policy frameworks and agenda of several middle-income and low-income African countries.
Global Index Insurance
Facility (GIIF)
• Expands the use of risk management tools in agriculture production, food security and disaster risk reduction;
• Fosters development of local insurance markets through technical & financial support to public and private sectors
DRF Analytics
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- Financial risk assessments and customized DRF tools in pilot countries- 3 generic tools developed (risk assessment, financial strategy design and implementation)
- Co-funded development of 4 customized tools in non-pilot countries - Training on fundamentals of DRF Analytics (e-learning and face-to-face)
Helps improve understanding and increase capacity of governments to make risk-informed decisions on financial resilience based on sound financial analysis.Develops and customizes DRF tools tailored to the capacity and data availability for each country.
- Pilot country implementation (Philippines, Pakistan, Fiji)- Generic tools to be adapted to support additional countries- Knowledge management for users of DRF analytics information- Monitoring and evaluation framework for DRF programs/strategies
Project development objective
Components
Results
Africa DRF Initiative
88
- Cyclone Idai: use of risk information generated by the program for rapid damage assessments
- Supporting 22 African countries in developing risk financing tools and strategies- To date, 60 knowledge exchanges and trainings designed to gather and
disseminate lessons learned and build capacity of governments.
Supports the development of risk financing strategies at regional, national and local levels, improves financial response capacity post-disaster and mitigates the socio-economic, fiscal and financial impacts of disasters in African countries.
- Creating the enabling environment for risk financing- Supporting African countries in developing risk financing tools, instruments and
strategies- Facilitating regional risk financing and knowledge sharing initiatives
Project development objective
Components
Results
Global Index Insurance Facility
99
- Insured farmers: 4.6m contracts sold in 2018 (28m beneficiaries)- Insurance industry: 20 insurers in 2018- Reinsurance industry: 6 in 2018 (incl. regional reinsurers)- Training participants: from Bangladesh, Benin, Burkina Faso, Burundi, Cameroon, China,
Cote d'Ivoire, Gabon, Ghana, Indonesia, Mali, Mozambique, Nigeria, Philippines, Rwanda, Senegal, Sri Lanka, South Africa, Togo, Ukraine and Zambia.
To provide smallholder farmers with access to affordable insurance products improving their resilience to disasters. GIIF offers advisory services and funding to financial sector actors, agribusinesses and governments to mainstream risk management in the agriculture sector.
- Technical capacity to insurers, regulators, MFIs, public-sector stakeholders - Performance-based funding to private sector to support the initial costs in the
agriculture insurance business line- Regional industry level reinsurance pools to lower the premium cost for beneficiaries
and limit losses for insurers
Project development objective
Components
Results
World Bank - Growing Support on DRFto help MOF integrate risk finance in their macro-fiscal policy
Over 60 countries supported
Over $4 billion transferred to financial markets
15 Cat DDOs worth over $3 billion in contingent lines of credit for disaster response; many more under preparation
Colombia (2)
Peru (2)
Panama
El Salvador
Costa Rica
Kenya
Sri Lanka
Philippines (2)
Serbia
Philippines (2)
Mexico (3)
Pacific Alliance Chile, Colombia,
Mexico, Peru
CCRIF (8)
Uruguay
Malawi
Global Pandemic
PCRAFI (5)
SEADRIF
Seychelles
Guatemala
Romania
WB Cat DDO
Market Transaction
(#) – Number operations / transactions
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Sovereign catastrophe risk pools
3 existing regional sovereign catastrophe risk pools 1 being established
Source: Authors and World Bank. 2017. “Sovereign Catastrophe Risk Pools.” Technical Contribution to the G20.
Anguilla
Antigua & Barbuda
Barbados
Belize
Cayman Islands
Dominica
Grenada
Haiti
Jamaica
St Kitts & Nevis
Saint Lucia
St. Vincent & the Grenadines
Trinidad & Tobago
Turks & Caicos Islands
Nicaragua
Burkina Faso
Mali
Mauritania
Niger
Senegal
The Gambia
Marshall Islands
Samoa
Tonga
Cook Islands
Vanuatu
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Cambodia
Indonesia
Japan
Lao PDR
Myanmar
Singapore
What’s next?Disaster Risk Finance 2.0Three key innovations
1. 2. 3.
Cat risk pools -
sharing more
than risk Full service regional risk financing platforms addressing specific DRF needs for more countries
Better targeted
financial solutions for specific drivers of contingent liabilities
Increasing use of
technology such as Innovation in Earth Observation Data, Financial Technology, Big Data and Artificial Intelligence
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1.
Cat Risk pools—sharing more than risk
PCRAFI—Private Sector Window helping domestic insurers access international reinsurance markets
ARC—Replica Coverage cat risk insurance policies offered to UN agencies and other humanitarian actors to match ARC country insurance policies.
CCRIF—New Insurance Products excess rainfall insurance, fisheries insurance
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1.
Cat Risk pools—sharing more than risk
A DRF Platform for ASEAN Countries. Tailored to diverse perils, size, income level
www.seadrif.org
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Cat Risk Pool
2.
Targeted risk financing solutions to better
match government liabilities for efficient
portfolio risk management
Identify sources of contingent liabilities
Quantify contingent liabilities
Developing targeted financial instruments
Public Assets
National-Subnational Cost-Sharing
Social Assistance
(shock responsive safety net)
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New Frontiers in DRF
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Integration of disaster risks in core macro fiscal frameworks and regional industry efforts
Natural Disasters
Extreme weather events
Conflict
Cyber risk
Displacement
Pandemics
Financial management of interconnected risks
+
$
$
Expand to new sources of risks
Enabling early action after climate shocks, disasters, and crises by setting up financing ahead of time and connecting this to pre-agreed interventions.
Alliance Partner
of
Supported
by
Implemented and Managed
by
The Global Risk Financing Facility
17
Launched at the 2018 World Bank-IMF Annual Meetings. Expected donor contributions of over US$145M to invest in establishing and scaling up pre-arranged crisis risk financing instruments, including market-based instruments, and the systems that enable better response.
Over time the GRiF will test and scale up new financial solutions to cover a wider range of crises, including in support of the World Bank’s Global Crisis Risk Platform.
