Niels Holm-Nielsen Lead Specialist Disaster Risk Management

Disaster Risk Management

Who Cares?

1

1 tropical storm was the likely cause of 20% of the

increase in poverty in Guatemala between 2006

and 2011

The Financial Markets Are Watching

Average losses due to extreme weather events for Selected countries from 1993-2012

Source: Harmeling, S. and Eckstein D. “Global Climate Risk Index 2013”. Germanwatch, November 2012. http://germanwatch.org/fr/download/7170.pdf

• Showing the top 15 countries in global rank. • Sorted by Losses per GDP (%)

0.005.0010.00

Grenada

Kiribati

Dominca

St. Kitts & Nevis

Mongolia

Belize

Antigua & Barbuda

Honduras

Cuba

Bahamas

Djibouti

Samoa

Moldova

Tajikistan

Nicaragua

Average Annual Losses per GDP (%) top 15 countries

6

7

8

Disaster risk today

2

10

Risks & Disaster Events Urban Agglomerations Concentrate Risks

10

0

300

600

1961 -1970

1971 -1980

1981 -1990

1991 -2000

2001 -2010

Count of Disasters

$0

$25,000

$50,000

1961 -1970

1971 -1980

1981 -1990

1991 -2000

2001 -2010

Damages from Disasters (US$ millions)

Source: EM-DAT. Truncated for the 2010 losses.

Source: EM-DAT

Disaster events in LAC are increasing, as are disaster losses

Damages and Losses from disasters are fiscal shocks, which often result in budgetary deficits & increased debt

0%

100%

200%

Belize -1961

Nicaragua- 1972

Dominica- 1979

St Lucia -1980

Jamaica -1988

AB - 1995 Dominica- 1995

St. Kitts &Nevis -1995

Honduras- 1998

St. Kitts &Nevis -1998

Grenada -2004

Guyana -2005

Haiti -2010

St Lucia -2010

Select Economic value of Damages and Losses from Disasters as a % of GDP

Hurricanes: David & Frederick

Hurricane: Allen

Hurricane: Hattie

Hurricane: Luis

Hurricane: Georges

Hurricane: Ivan

Flood

Earthquake

Hurricane: Tomas

Hurricanes: Luis &

Marilyn Hurricane:

Luis

Hurricane: Gilbert

Earthquake Hurricane:

Mitch

How we work Managing disaster risk

3

Disaster Risk Management in the

World Bank Group

World Bank DRM Practice Group Addressing disaster risk Bank DRM programs are organized around 5 pillars

Min of Finance: Contingent Liabilities Assess the Annual Expected & Probable Maximum Loss Based on previous events and modeled loss

Line Ministries: Physical Risk to assets Complete multi-hazard risk models in identified high risk areas. Build platform to dynamically visualize expected physical impact

Manage Liabilities -Budget mechanisms -Sovereign protection -Support to insurance market development

Reduce Liabilities Identify and visualize specific risk reduce options

Using probabilistic CBA, present a menu of investments identified in physical risk assessment with assessed IRRs Menu of investments approach enables decision makers to assess compare the political costs with the economic gains

Prioritize investment

Make Govt decision makers aware of disaster risk

Provide options to manage and reduce the contingent liability

Future risk: building code enforcement, land use planning, early warning Current Risk: protective infrastructure and retrofitting

Our clients: Ministries of Finance and line Ministries

How we work: Preparedness in action

How we work: Financial Protection in Action

Including disaster risk within an integrated fiscal risk management framework

Public Debt Management

Fiscal Risk Management (commodities, currency and others)

Disaster Risk Management

Disaster Risk Financing and

Insurance

Establish effective administrative systems for post-disaster approval, transfer and

monitoring of funds

Reduce contingent liability

Reduce disaster impact through integrating risk information in public investments

Reduce economic impact by creating incentives for private sector resilience

Integrate disaster risk in fiscal risk and public debt management

Improve post-disaster budget response capacity

Clarify post-disaster financial assistance

Assess and quantify risks

Define and measure contingent liabilities

Pre-Disaster

Post-Disaster

Reduce Financial Risk

Secure Financing

Deploy and Monitor Funding

Assess Risks

Public Finance Approach to Disaster Risk Management

Risk Profile

Antigua and Barbuda Grenada Jamaica Source

Risk Profile Earthquake AAL, Earthquake (US$ millions) $21 $5 $26 GAR 2013

AAL/Total Exposed Produced Capital, Earthquake (%) 8.7 3.7 0.9 GAR 2013

PML250, Earthquake (US$ millions) $376 $170 $1,216 GAR 2013 PML250/GDP, Earthquake (%) 31.1 22.0 8.5 GAR 2013 Cyclones

AAL, Cyclones (US$ millions) $12 $1 $59 GAR 2013 AAL/Total Exposed Produced Capital, Cyclones (%) 4.9 1.2 2.0 GAR 2013

PML250, Cyclones (US$ millions) $446 $81 $2,255 GAR 2013 PML250/GDP, Cyclones (%) 36.8 10.4 15.8 GAR 2013

Earthquake + Cyclones AAL, Eq+Cy (US$ millions) $33 $6 $85 GAR 2013 AAL/Total Exposed Produced Capital, Eq+Cy (%) 13.6 4.9 2.9 GAR 2013

PML250, Eq+Cy (US$ millions) $822 $251 $3,471 GAR 2013 PML250/GDP, Eq+Cy (%) 67.9 32.4 24.3 GAR 2013

Risk Financing Mechanisms Participation in CCRIF Yes Yes Yes CCRIF Annual Report 2011-2012 Payouts from CCRIF No No No CCRIF Annual Report 2011-2013 Property Insurance Penetration (%) 3.08 1.26 1.03 AXCO Global Statistics, 2013

SCHEMATIC OF A POTENTIAL CENTRAL AMERICA-CCRIF

PARTNERSHIP

SHARED Capital

CARIBBEAN Capital

CENTRAL AMERICA /

DR Capital

Payout Payout

Participation Deposit

Donor Contribution

Reinsurance Contract

CARIBBEAN Countries

CENTRAL AMERICA /

DR

Caribbean Catastrophe Risk Insurance Facility (CCRIF)

Reinsurance Contract

Payout

REINSURANCE MARKET

How we work: Resilient Reconstruction in Action

Barbados Doppler Radar

Dec 24, 2013 7:55 PM

1.7 mm/hr Rabacca Station

Dec 24, 2013 8:50 PM

18.8mm/hr Rabacca Station

Dec 24, 2013 9:00 – 10:00 PM

119.3mm/hr Rabbacca Station

MAX SCALE 27mm/hr

Poorest areas got the most rainfall

Maximum Rainfall Intensity in 3 Hours, Dec 24 Poverty Head Count, 2008

Average poverty head count in affected areas - 44%

Impact

Georgetown

Congo Valley Buccament

Chateaubelair

Damage and Losses: By Sector

Approximately 93% of the damage and losses experienced in the infrastructure sector

Transport 76%

Housing 9% Electricity

8%

W&S 4%

Health 2%

Agriculture 1%

Tourism 0%

Education 0%

I&C 0%

Damage and Losses by Sector

$0

$20

$40

$60

Mill

ions

Damage and Losses by Sector (US$ millions)

Damage LossesW&S - Water & Sanitation; I&C - Industry & Commerce