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5th International Disaster and Risk Conference IDRC 2014 Integrative Risk Management - The role of science, technology & practice 24-28 August 2014 in Davos, Switzerland

5th International Disaster and Risk Conference IDRC 2014 Integrative Risk Management - The role of science, technology & practice 24-28 August 2014 in Davos, Switzerland

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  • 1. Financial Protection against Disasters Is it worth your money? Benedikt Signer Disaster Risk Financing and Insurance Program The World Bank - GFDRR 5th International Disaster and Risk Conference Special Panel, Is Financial Protection Worth It? August 28, 2014 With support from
  • 2. Outline 1. Disaster Risk Financing and Insurance at the World Bank 2. Sovereign DRFI Impact Appraisal Project 3. Initial findings – “Characteristics of Financial Resilience”
  • 3. Financial protection is a growing pillar in DRM Pillar 1: Risk Identification Pillar 2: Risk Reduction Pillar 3: Preparedness Pillar 4: Financial Protection Pillar 5: Resilient Recovery Improved identification and understanding of disaster risks through building capacity for assessments and analysis Avoided creation of new risks and reduced risks in society through greater disaster risk consideration in policy and investment Improved capacity to manage crises through developing forecasting and disaster management capacities Increased financial resilience of governments, private sector and households through financial protection strategies Quicker, more resilient recovery through support for reconstruction planning
  • 4. WB-GFDRR Disaster Risk Financing and Insurance (DRFI) Program Sovereign Disaster Risk Financing Agricultural Insurance Property Catastrophe Disaster Risk Financing Analytics Risk Insurance Disaster-linked Social Protection Increase the financial response capacity of national and subnational governments to meet post-disaster funding needs without compromising their fiscal balances and development objectives Protect agricultural producers through agricultural insurance to reduce the impact of disaster shocks, safeguard livelihoods and increase agricultural productivity. Protect homeowners and SMEs against losses arising from property damage Protect the poorest and most vulnerable through Social Protection programs with ex-ante financed mechanisms that scale up assistance to beneficiaries immediately following disaster shocks. Empowering governments to take informed decisions on the financial management of natural disasters Financial Protection Increasing the financial resilience of governments, private sector and households through financial protection strategies against the economic and fiscal impact of natural hazards PILLAR 3 PILLAR 4 PILLAR 5 CROSS CUTTING Knowledge and Policy Advising EVIDENCE BASE Support stakeholders with information which will lead to and inform actions in support of building financial resilience
  • 5. Sovereign disaster risk financing around the world Caribbean Catastrophe Risk Insurance Facility Mexico: FONDEN fund, Catastrophe bond Colombia: DRFI Strategy, Insurance of public assets and concessions Pacific Catastrophe Risk Assessment and Financing Initiative African Union, African Risk Capacity Indonesia: Exploring Sovereign EQ risk transfer Ethiopia: Scalable social safety net Indian Ocean Islands: Exploring regional risk pooling initiative Philippines: DRFI Strategy, Climate and Disaster Resilience Fund, Sovereign risk transfer Kenya: Agricultural Insurance Malawi: Uruguay: Drought risk management Insurance for the impact of drought / oil prices on hydropower Seychelles: Contingent Credit (CatDDO)
  • 6. Sovereign DRFI: Impact Appraisal Project To develop a quantitative impact appraisal tool that results in headline figures on the probabilistic impact of sovereign DRFI programs. COST Example of IMPACT Annual average $ expenditure on SDRFI program Annual average impact on headcount poverty
  • 7. Bringing together physical science and economics What disaster risk modeling brings: What economics brings: Probabilistic modelling of well-defined covariate natural hazards: 1. Direct loss to property. Direct loss concerns the reduction of value of property and goods owned by the householder 2. Household agricultural production loss. The classification includes crop loss, livestock death, etc. 1. Definition and measurement of poverty 2. Microeconomic impact of shocks 3. Macroeconomic modelling of prices, etc.
  • 8. Impact Appraisal Project Timeline Background research (16 background papers) Evidence Gaps Draft Operational Framework Operational Framework RESEARCH Research to address gaps in the evidence base as identified during Phase 1 CASE STUDIES Test approach in Ethiopia, Niger, Bangladesh, Philippines and Jamaica PHASE 1 PHASE 2 PHASE 3 2013 2014 2015 2016
  • 9. Financial Resilience Plan in advance and agree ex ante on rules and processes for budget mobilization and execution, for greater discipline, transparency, and accountability in post-disaster spending. Availability of post-disaster funds at the appropriate time for response, recovery and reconstruction. Clarify who is responsible for risk – clearly establishing the contingent liability of the national and subnational government, donors, the private sector, and households. Minimize the cost of sufficient capital for effective emergency response and reconstruction as well as for investment in risk reduction and prevention. Appropriate risk information allows decision makers to assess the underlying price of risk, and clarify costs and benefits of investing in risk reduction or risk financing.
  • 10. Thank you to all our project partners “all models are wrong, but some are useful” George E. P. Box