IDBs Integrated Disaster Risk Management and Financing Strategy

1
IDBs Integrated Disaster Risk Management and
Financing Strategy
Workshop on Risk Transfer Association of
Caribbean States High-Level Conference on
Disaster Reduction, Saint Marc, Haiti. November
14, 2007
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Summary and Conclusions

• Risk transfer is one of several options for
  managing country disaster risk
• IDB Strategy is to support the development of RT
  instruments within the framework of a
  well-designed, integrated disaster risk
  management and financing plan, as part of
  national risk management systems
• Plan characteristics
• Informed by country risk mapping and modelling
• Investments in mitigation and prevention should
  be first line of action

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• IDB support available for development of
  integrated risk management plans

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The Imperative of Reducing Risk

• Disaster Impacts (30-year period)
• 4 million affected
• 5,000 deaths
• US3.2 billion in physical losses

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• Annual growth rate in disaster losses in LAC of
  20 since 1980 while GNP growth rate has been
  only 3-4 per year

• Increasing gap to finance disaster losses makes
  traditional focus on emergency response and
  reconstruction unsustainable.

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Resource Gap to Finance Reconstruction The IDBs
Disaster Deficit Index (DDI)

• The DDI Ratio of Economic Loss for Maximum
  Considered Event and Economic Resilience
• The DDI has been prepared for the 50, 100 and
  500-year event.
• A DDI greater than 1.0 means the economic
  incapacity of the country to cope with extreme
  disasters even where indebtedness is carried to a
  maximum. The greater the DDI, the greater the gap.

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Resource Gap for Reconstruction for Selected
Countries
DDI and Probable Maximum Loss (100 years)
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Challenges to Effective Risk Management

• Countries are not sufficiently addressing the
  risk disasters pose to development despite
  increased awareness and some progress
• Constraints to Adoption of Adequate Risk
  Management
• Disaster prevention is considered a cost, not an
  investment
• Governments seldom have a well established
  financing plan for contingent disaster
  liability
• Risk is not transferred through insurance

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Integrated Risk Management and Financing

• Improve risk management by combining the
  reduction of risk with the ex-ante financing of
  residual risk.
• Ex ante strategy that combines mitigation
  investments and pre-established financial
  protection.
• Prevention investments are needed to break the
  disasters-reconstruction-disasters-new
  reconstruction cycle

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IDBs Strategic Response

• New Business Model for Disaster Risk Management
  (DRM)
• Policy and Action Plan for Improving Disaster
  Risk Management

Objective Strengthen Bank effectiveness to
support borrowers in risk reduction and to
mitigate the impacts of natural disasters
Identifies new strategies, procedures and
financial instruments for managing risk
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IDBs Strategic Response

• Proactive stance to DRM
• Comprehenive approach
• Risk analysis
• Prevention and mitigation
• Financial protection and risk transfer
• Emergency preparedness and response
• Rehabilitation and reconstruction

• Emphasis on pre-disaster actions and assistance

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National Disaster Risk Management Systems
Risk Identification and Assessment

• National DRM systems based on integrated RM
  framework

Mitigation and Preparedness
Residual risk
Ex ante Risk Financing and Transfer Instruments
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Operational Strategy for the Development of
Integrated Disaster Risk Management Programs
Objective Strengthening of National Disaster
Risk Management Systems
Strategic Commitment at Government Level
Financing and Transfer of Disaster Risk
Investments to Reduce Vulnerability
National Policies and Programs for Risk
Management
Risk Information Collection and Analysis
Design Implementation Programs for Disaster
Risk Financing and Transfer
Development of integrated DRM programs and
financing local insurance markets
Design and financing of prevention and
mitigation projects
Design and Operation of Mapping and Modeling
systems
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Integrated Plan for Disaster Risk Management
Basic Approach
Quantification of Losses
Max. Prob. Losses
Losses without Coverage
Exposure Retained
Design Integrated DRM Plan
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IDB Financial Instruments for Integrated DRM
IDB Financial Instruments
National Level Activities
Disaster Prevention Fund US 10 mm
Determination of Expected Losses
MulitDonor Disaster Prevention Trust Fund US 4
mm
Design of Integrated DRM Plans
Fiduciary Funds/Various Countries
Immediate Response Facility for Emergencies US
100 mm
Development of Fiscal and Domestic Insurance
Programs
Sectoral and Investment Loans
Financial Guarantees
Development of Financial Instruments
Emergency Donations
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Bank Support for Country Risk Mapping and
Modeling

• Indicators of Disaster Risk and DRM Program
• Indicators developed for 14 of 26 countries
• Country risk evaluations, for high risk countries
• In progress for Peru, Boliivia, Guatemala,
  Jamaica

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Design Sequence for Proposed Regional Parametric
Insurance Facility
IDB Non-reimbursable resources
Regional Insurance Facility Legal Operational Fin
ancial
Strategic Commitment
Quantification of Losses
Integrated RM Plans
Launch
IDB Reimbursable Resources
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Summary and Conclusions

• Risk transfer is one of several options for
  managing country disaster risk
• IDB Strategy is to support the development of RT
  instruments within the framework of a
  well-designed, integrated disaster risk
  management and financing plan, as part of
  national risk management systems
• Plan characteristics
• Informed by country risk mapping and modelling
• Investments in mitigation and prevention should
  be first line of action

i

• IDB support available for development of
  integrated risk management plans

17
Contact InformationCassandra
Rogerscassandrar_at_iadb.org