The document discusses risk and disaster management. It provides background on Mexico's development of a catastrophe earthquake "insurance" supported by cat bonds and reinsurance to provide funds for emergency expenses to the Mexican Calamity Fund (FONDEN) if certain requirements are met. It states that risk and disaster management must be incorporated into development planning to help reduce impacts on development and improve situations for the poor during crises. Every disaster should also be viewed as an opportunity to "build back better".

1. Why Do Risk & Disaster Management Matter
Risk and Opportunity: Managing Risk for Development
The World Bank via Coursera
David Solís
An Introduction to Disaster Management

2. 2
Risk & Disaster Management
Example
Mexican Insurance for Catastrophic Earthquakes
Summary
Foundations
1
2
3
4
5References
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3. 3
A Disaster
is an event that occurs in most cases suddenly and
unexpectedly, causing severe disturbances to people,
objects and environment, resulting in loss of
life ,property and health of the population. Such a
situation causes disruption in normal pattern of life,
generating misfortune, helplessness and suffering
affecting the socio-economic structure of a region /
country to such an extent that there is a need for
assistance or immediate outside intervention.

4. Ingredients of a Disaster
‣ A phenomenon or event which constitutes a
trauma for a population / environment.
‣ A vulnerable point / area that will bear the brunt
of the traumatizing event.
‣ The failure of local & surrounding resources to
cope with the problems created by the
phenomenon.
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5. Classification of Disasters
‣ Natural, Man-made & Human-induced
‣ Disasters occur in varied forms
‣ Some are predictable in advance
‣ Some are annual or seasonal
‣ Some are sudden and unpredictable
‣ Factors leading to a Disaster
‣ Meteorological, Geological, Ecological or Environmental,
Technological, etc.
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6. General Effects of Disasters
‣ Loss of life
‣ Injury
‣ Damage to and destruction of property.
‣ Damage to and destruction of production.
‣ Disruption of lifestyle
‣ Loss of livelihood.
‣ Disruption to essential services
‣ Damage to national infrastructure
‣ Disruption to governmental systems
‣ National economic loss
‣ Sociological and psychological after effect.
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7. 7
Hazard
A dangerous condition or events that threaten or have the potential for
causing injury to life or damage to property or the environment.
Hazards are basically grouped in two broad headings:
‣Natural Hazards (hazards with meteorological, geological or
biological origin)
‣Unnatural Hazards (hazards with human-caused or technological
origin)
Natural phenomena are extreme climatological, hydrological, or
geological, processes. A massive earthquake in an unpopulated area,
is a natural phenomenon, not a hazard. But when these natural
phenomena interact with the man made habitat, they may cause wide
spread damage. Then, they become hazard.

8. 8
Natural Hazards that Place Mexico’s Communities at Risk
Mexico is one of the world’s most exposed countries to natural
hazards.
‣ Hurricanes
‣ Earthquakes
‣ Floods
‣ Volcanic Eruptions
‣ Dust Storms
‣ Landslides
‣ Environmental Change
‣ Global Climate
Change

9. Time Duration of Natural Disasters
9
Natural Disaster Duration
Earthquakes Seconds / minutes
Cyclones Days
Floods Days
Droughts Months

10. 10
Risk & Disaster Management
Example
Mexican Insurance for Catastrophic Earthquakes
Summary
Foundations
1
2
3
4
55References
5

11. 11
Disaster Management
!
An applied science which seeks, by the systematic
observation and analysis of disasters, to improve
measures relating to prevention, mitigation,
preparedness, emergency response and recovery.

12. 12
Risk
!
A measure of the expected losses (deaths, injuries,
property, economic activity etc) due to a hazard of a
particular magnitude or Intensity occurring in a given
area over a specific time period.

13. 13
Exposure
!
The value and importance of the various types of
structures and lifeline systems (such as water-supply,
communication network, transportation network etc
in the community serving the population)

14. 14
Vulnerability
!
The extent to which a community, structure, service, or
geographic area is likely to be damaged or disrupted by the
impact of particular hazard, on account of their nature,
construction and proximity to hazardous terrain or a disaster
prone area.
‣Physical vulnerability – weak buildings, bridges, service lines,
lifeline structures, production units etc.
‣Social & Economic vulnerability. Human losses in disasters in
developing countries are seen to be higher when compared
to developed countries.

15. 15
Risk & Disaster Management Cycle

16. Principles of Disaster Management
‣ Risk & Hazard Assessment
‣ Planning
‣ Organization
‣ Resource Utilization
‣ Need for Specialists
‣ Training
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17. Towards Disaster Risk Reduction
Natural Hazards
Policy
Adoption
Risk
Assessment
Policy
Assessment
‣ Hurricanes
‣ Earthquakes
‣ Floods
‣ Volcanic Eruptions
‣ Dust Storms
‣ Landslides
‣ Environmental Change
‣ Global Climate
Change
‣ Vulnerability
‣ Exposure
‣ Event
‣ Expected Loss
‣ Cost
‣ Benefit
‣ Consequences
‣ Educational Surge
‣ Prevention / Mitigation
‣ Preparedness
‣ Emergency Response
‣ Recovery and
Reconstruction

18. 18
Risk & Disaster Management
Example
Mexican Insurance for Catastrophic Earthquakes
Summary
Foundations
1
2
3
4
55References
5

19. 19
‣ 1995: Natural Disaster Fund (FONDEN)
• Institutional framework for natural disaster risk management
• Budgetary Planning: Public Policy framework (sustainability)
• 3 eligible categories for financing
– Emergency relief and reconstruction
– Public infrastructure
– Productive assets for marginal populations (including low income or subsistence
farmers)
» Target subsistence farmers: defined based on landholdings per state and eligibility inventory
from PROCAMPO
!
‣ 2001-2002: Special Contingency Fund for Agriculture (FAPRACC)
• Spin-off from FONDEN (transferred to the Agricultural Ministry)
• Insurance was defined as an eligible expense category of gov’t resources for
risk management
• The Agricultural Ministry invested in R&D for the design of the drought safety
net program
– Based on accumulated rainfall (insured: State Governments)
» Coverage for CAT loss: Equivalent to yield loss bigger than 70%
– Executing capacity on the ground (technical expertise)
– Institutional flexibility for an appropriate financial engineering effort
The Mexican Calamity Funds - Background

20. 20
Mexican Insurance for Catastrophic Earthquakes
‣In 2006, México innovated in region and the world,
developing an “insurance” for catastrophic earthquakes.
!
‣The “insurance” is supported by cat-bonds and high
rated reinsurance and provide resources for emergency
expenses.
!
‣The “insurance” indemnify to Fonden (Mexican Calamity
Fund) if met the following requirements:
– A state of emergency declaration issued by the
Ministry of the Interior of Mexico and published in
the Mexican Official Gazette,
– Epicenter location in or on the boundary of a Zone,
and
– The following magnitude and depth requirements:
Zone A Zone B Zone C
Magnitude (M 8 8 8
Max Focal Depth (km) 200 200 150
Insure amount
150m
reinsurance
150m
bonds
150m
reinsurance

21. 21
Risk & Disaster Management
Example
Mexican Insurance for Catastrophic Earthquakes
Summary
Foundations
1
2
3
4
55References
5

22. 22
Risk & Disaster Management must
be a formal component of
development planning.
!
For development to be sustainable, disaster
mitigation must be built into the planning process.
In this way, countries can reduce some of the
negative impacts on development and improve the
situation of the poor during and after crises.

23. 23
Every disaster
must be treated as
an opportunity
to build back better

24. 24
Risk & Disaster Management
Example
Mexican Insurance for Catastrophic Earthquakes
Summary
Foundations
1
2
3
4
55References
5

25. 25
References
‣ Shaw, Rajib; Disaster Recovery: Used Or Misused
Development Opportunity. Springer, 2014.
‣ The World Bank; The International Bank for Reconstruction
and Development. (May de 2012). FONDEN: Mexico’s
Natural Disaster Fund – A Review. Downloaded from
Protección Civil: http://www.proteccioncivil.gob.mx/work/
models/ProteccionCivil/Almacen/libro_fonden.pdf
‣ The World Bank; World Development Report 2014. Risk and
Opportunity. Managing Risk for Development
‣ Yoe, Charles. Principles of risk analysis: decision making
under uncertainty. CRC press, 2011.