Financial Management of Flood Risks in Developing Countries Risk
Sharing and Risk Transfer Slide 2 DISASTER LOSSES ARE ON THE RISE
Source: MunichRe (2000) Slide 3 Country Vulnerability is Key
Countries that can afford their risks, eg Austria Countries that
can afford their risks, but with regions that cannot, eg Hungary
Countries that cannot afford their risks, eg El Salvador Slide 4
Slide 5 The Upper Tisza Study
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Hydro-Model One-dimension Unsteady Flow Flood Model GIS-Based Flood
Depth Loss Model Agriculture Infrastructure Public Survey Policy
Model Cost-Benefit Stochastic Opt. Stakeholder Interviews informed
by the model Stakeholder Workshop Slide 6 Public/Private Insurance
System
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Scenario 1Scenario 2Scenario 3 Voluntary private insurance (cross
subsidies) Voluntary private insurance (risk based) All-hazards
private insurance (cross subsidies, government pays premiums for
poor) Government reinsurance (with tax payer support) Government
compensates victims (percentage of losses) Government compensates
victims (fixed amount) Voluntary private insurance (cross
subsidies) Slide 7 Slide 8 Pre- and Post-Disaster Financing Options
(Mitigation) Catastrophe fund Insurance Other hedging instruments,
eg Cat bonds Contingent credit Budget diversions Borrowing internal
external Loan diversions Taxes Aid Slide 9 Stability vs. Growth
Slide 10 Catch 22 The countries that can benefit from pre-disaster
financing instruments are those that can least afford it.
Challenge: Can we design new forms of "pre-disaster" aid to
developing countries that will enable them to insure against
disaster risks, and that link this insurance with loss mitigation
measures? Slide 11 Proposal To transfer developing country risks
into the global financial markets through International financial
institutions Private "charitable" investors Institutional
"charitable" investors
