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

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)

7. 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

8. 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.

9. 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

10. 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.

11. Thank you to all our project partners
“all models are wrong, but
some are useful”
George E. P. Box