INSURANCE AND RISK SHARING MODELS AND OPTIONS

Disaster Risk FinanceAPRIL 27, 202

ABAC DISASTER RECOVERY PLANNING AND RISK MANAGEMENT TASK FORCE MEETING

BENEDIKT SIGNERWORLD BANK

BSIGNER@WORLDBANK.ORG

Document: ETF3 41-012Draft: FIRSTSource: ETF3 ConvenorDate: 18 May 2021

Four Core Principles

of Risk Financing

And how can ABAC

members support resilient economies?

2

Timeliness of Funding No One Financial Instrument CanAddress All Risks

To make sound financial decisions you need to have the right

information

How money reaches beneficiaries is as important

as where it comes from

Core Principle 1: Disaster Risk Layering

HAZARD TYPE

FINANCING INSTRUMENT

Low

Freq

uenc

y/H

igh

Seve

rity

Hig

hFr

eque

ncy/

Low

Seve

rity

Market-BasedInstruments

ContingentFinancing

Budgetary Instruments

NO SINGLE FINANCIAL INSTRUMENT CAN ADDRESS ALL RISKS

Inte

rnat

iona

lAss

ista

nce

(unc

erta

in)Risk Transfer

ContingentCredit

Budget Reserves/ Reallocations

Risk transfer for assets such as property insurance or agricultural insurance and risk transfer for budget management like paramedic insurance, cat bonds/swaps

Financial instruments that provide liquidity immediately after a shock

Reserve funds specifically designated for financing disaster related expenditures, general contingency budgets, or diverted spending from other programs

3Fundamentals of Disaster Risk Finance

Risk Layering In Practice: Philippines’ DRF strategyRole of the Business community?

4Fundamentals of Disaster Risk Finance

Core Principle 2: Timeliness of fundingSpeed matters, but not all resources are needed at once.

RES

OU

RC

E R

EQU

IREM

ENTS

($)

T IME

Reconstruction

5Fundamentals of Disaster Risk Finance

RecoveryRelief

Early Action?

6

Core Principle 3How money reaches beneficiaries is as important as where it comes from

Fundamentals of Disaster Risk Finance

Government DRF Strategy

Public Services

Livelihood Support

Public Assets

$

To Make Sound Financial Decisions you need to have theright information

DRFIANALYTICS

Quantitative Analytics

Financial Decision Making Tools

Financial Impact Analysis

Cost Benefit Analysis

Loss Data (HistoricalData/CAT Risk Model

Microeconomic Data

Financial and other Data

Understanding FinancialImpact of Disasters

Make evidence based financial decisions

Leverage private financialmarkets using quantitative outputs

Monitor and evaluate DFRI strategies

7Fundamentals of Disaster Risk Finance

Core Principle 4: Data and Analytics

Role for

ABACmembers to

support

resilience?

8

- Support government to implement risk management and risk financing policies and instruments.

- Clarify ‘risk ownership' in PPPs and concessions.

- Integrate risk in private investments and planning.

- Advocate for better integration of resilience in public investment, planning, and service delivery.