Disaster, Risk and Economic Vulnerability

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Disaster, Risk and Economic Vulnerability

• Joanne Linnerooth-Bayer

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Background Pooling losses Tisza study CATSIM
model Policy
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Reduction first priority

• The World Bank and the U.S. Geological Survey
  estimate that economic losses from natural
  disasters in the 1990s could have been reduced by
  280 billion had 40 billion been invested in
  preventive measures. According to the U.N.
  Secretariat for the International Decade of
  Natural Disasters, worldwide, one dollar is spent
  on prevention for every 100 spent on rescue
  efforts.

Kobe (Sorce EQE)
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Government assistance
Government financed housing reconstruction after
the 2001 floods in Hungary Source IIASA,
Linnerooth-Bayer and Vari, 2003
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The Tisza Study __________________________________
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Hungary Stakeholder Consensus
Private Reinsurance
Private Insurance Voluntary Flat rate Subsidies
for poor households
Government assistance only to insured
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Turkish Catastrophe Insurance Pool
Reinsurance World Bank
Private Reinsurance
Reinsurance World Bank
Government fund Mandatory Risk-based
Government compensation only to insured
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• Public-private partnerships
• Micro-insurance schemes
• Risk transfer for public assets
• Regional pooling arrangements

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Should governments of developing countries
transfer their catastrophe risks?

• Arrow-Lind theorm says no,
• But, RMS has shown that there may be exceptions

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Development paths with and without financial risk
management
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Public Sector Financial Vulnerability
Economic Risk
Financial Resilience
Hazard Exposure Sensitivity
Fiscal preparedness
Financing Gap
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Financial vulnerability in Honduras to hurricanes
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The CatSim Model

• What does the CatSim Model?
• It assesses the costs and risks of financial
  vulnerability and analysis selected ex-ante
  financial instruments measures for reducing
  vulnerability.
• What is unique/new about the CatSim Model ?
• First integrated modeling approach to assess
  financial risk management strategies for natural
  disaster.
• Includes ex-ante and ex-post measures from an
  inter-correlated perspective.
• User can change parameters and assess the
  consequences directly.
• Probability based approach and dynamic modeling
  of economic effects.

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CatSim ModelCase Study Honduras
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CatSim ModelCase Study Honduras
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CatSim ModelCase Study Honduras
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IIASA CATSIM Tool

• Tested at IIASA workshop by policy makers from 5
  countries
• East Asian capacity building workshop planned
• World Bank meeting planned

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Future

• Munich Initiative
• Dongting
• ADAM
• NeWater

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IIASA
Linneroth
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Bayer et al. 2003
Mantaye
2000
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CatSim ModelUser Interface