du presentation - drr finance & insurance

7/31/2019 DU Presentation - DRR Finance & Insurance

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Suman SMA Islam

Dhaka, Bangladesh; 16 January, 2009


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book reference

http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/CATRISKbook.pdf

http://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdf
http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/CATRISKbook.pdfhttp://siteresources.worldbank.org/FINANCIALSECTOR/Resources/CATRISKbook.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://www.preventionweb.net/english/hyogo/gar/background-papers/documents/Chap6/ProVention-Risk-financing-practice-review.pdfhttp://siteresources.worldbank.org/FINANCIALSECTOR/Resources/CATRISKbook.pdfhttp://siteresources.worldbank.org/FINANCIALSECTOR/Resources/CATRISKbook.pdf


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discussion topics

some key words & concepts of finance

challenges of finance & insurance for DRM

disaster risk financing

a rights perspective of finance for DRM


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public finance; development finance

capital : financial capital; time value of money

fin. cap. investment market : demand & supply

investment = GDP - C - G - NX; I = (Y, r)f

Capital Export : 2006 Capital Import : 2006


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making investment decision

returns & profit

cost benefit analysis

risks & uncertainties - insurance, risk transfer/distribution,

risk premium.

options & opportunities

finance capitalism


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challenges of finance & insurance for DRM

Building a culture of prevention is not easy. While the costs of

prevention have to be paid in the present, its benefits lie in a distantfuture. Moreover, the benefits are not tangible; they are the disasters

that did NOT happen. (Kofi Annan 1999)

complexity in probabilistic analysis, lack of data andinformation.

accounting for non-monetary values: value of life, safety

costs certain, benefits not, disincentives for political andinstitutional actors in context of very scarce resources. there

are always good reasons not to save for a rainy day.

need for long-term commitment, longer planning horizons

Samaritans Dilemma

Often post-event period as window of opportunity


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disaster risk financing

types of disaster risk financing

Emergencybudgetaryappropriations

Donor relief

Budget reallocation

Borrowings

Taxation

Ex-post financing

Reserveemergency funds

Contingent debt

Insurance Insurance Linked

Securities

Ex-ante financing


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why ex-ante disaster risk financing

brings an economic perspective on risk through pricediscovery and thus introduces strong incentives for

physical risk management (mitigation).

post-disaster financing strategies generally have high

opportunity costs for developing countries

greatly reduces government fiscal exposure to adverseconsequences of natural disasters thus ensuring stable

economic growth and fiscal management.

makes much needed liquidity readily available togovernments and households immediately following a

natural disaster thus greatly facilitating economic

recovery and addressing social inequities.


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emerging markets need ex-ante risk financing

immediate access to liquidity is critical for

governments post disaster.

the international community provides ex post relief,

but such funds are slow to mobilize (4-12 months) and

are not always efficiently used.

governments are fiscally unprepared to deal with

catastrophic losses. government borrowings and

budget reallocations take time.

Smaller nations with high debt burdens can no longer

afford to self-finance disaster risk.

(contd)


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major sources of disaster financing

On average, 92.6% of economic loss was retained by developing countries.

Sources:OECD,Munich Re


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key risk financing tools by social/geography


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risk financing/transfer instruments


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PPP in catastrophe risk financing


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key guiding principles : public intervention incatastrophe insurance markets in developing countries

Principle 1. Promote catastrophe risk financing in thedialogue on disaster risk management with the middle- and

low-income countries

Principle 2. Enhance competitive catastrophe risk markets

Principle 3. Use risk-based price signals to encourage

catastrophe risk management

Principle 4. Limit public subsidy programs to those that

minimize distortions of risk-based insurance premiums

Principle 5. Develop customized catastrophe insurance

solutions


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UnsafeConditionsRoot Cause

Limitedaccess toPower

Structures

Resources

Ideologies

Politicalsystem

Economic

system

Dynamic

Pressures

Lack ofLocal institutions

TrainingAppropriate skills

Local investmentsLocal Markets

Press freedom

Ethical standards in

public life

Macro-forcesRapid

Population

growth

Rapid urbanizationArms expenditureDebt repayment

schedule

Deforestation

Decline soil productivity

FragilephysicalenvironmentDangerous location

Unprotected buildings &

infrastructure

Fragile localeconomyLivelihoods at risk

Low income levels

VulnerablesocietySpecial groups at risk

Lack of local institutions

Public actionLack of disaster

preparedness

Prevalence of

endemic disease

Hazards

Earthquake

High winds(cyclone/hurrican

e/typhoon)

Flooding

Volcanic eruption

Landslide

Drought

Virus

& pets.

Disaster

RISK =Hazard +

Vulnerability

R = H + V

The Progression of Vulnerabilities1 2 3

a rights perspective of DRM financing


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Universal Declaration of Human Rights (UDHR)Article 3

Everyone has the right to life, liberty and security of person.

Article 22

Everyone, as a member of society, has the right to socialsecurity and is entitled to realization, through nationaleffort and international co-operation and in accordancewith the organization and resources of each State, of theeconomic, social and cultural rights indispensable for hisdignity and the free development of his personality.


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The International Covenant on Economic, Social andCultural Rights (ICESCR)

Article 9 of the Covenant recognizes "the right of everyone

to social security, including social insurance.

Article 11 recognizes the right of everyone to an adequatestandard of living. This includes, but is not limited to, theright to adequate food, clothing, housing, and "thecontinuous improvement of living conditions



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du presentation - drr finance & insurance

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