Natural Disaster Risk Management Arup Chatterjee Senior Financial Sector Specialist Asian Development Bank Let’s Listen to the Insurance Regulators and Experts Seminar organized by Association of Insurers and Reinsurers of Developing Countries, Association of Insurance Supervisory Authorities of Developing Countries, and Insurance Institute for Asia and Pacific Manila, 7 September 2012
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Natural Disaster Risk Management
Arup ChatterjeeSenior Financial Sector Specialist
Asian Development Bank
Let’s Listen to the Insurance Regulators and Experts
Seminar organized by Association of Insurers and Reinsurers of Developing Countries, Association of Insurance Supervisory Authorities of Developing Countries, and Insurance Institute for Asia and PacificManila, 7 September 2012
Outline
2
Disaster Risk Management in Developing Member Countries of Asia
Role of Multilateral Agencies in Disaster Risk Financing
An Overview of ADB's Disaster Risk Financing Activities
Key Messages
Q & A
3
4
5
6
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Measuring disaster impacts against development investments
On the disaster sideBetween 2005–2010 the economic costs of disasters exceeded $269
billion, averaging $53.8 billion a year.
On the development sideThe most recent OECD figures indicate that total ODA assistance to
ADB’s developing member countries for 2009 was $32 billion.
ImplicationThe combined contributions of all the region’s development partners
does not keep up with the economic and social costs of disasters in Asia and the Pacific.
8
Disaster risk reduction is development
• Disaster risk management is not a separate development sector.
• DRM is a development approach and is part and parcel of development actions.
• Without a risk-sensitive approach, development cannot be sustainable.
9
A Hurricane’s Impact on Asset Trajectory
shock recovery
better-off HH
poorer HH
poverty-trap
threshold
Time
Ass
ets
Source: Carter, Little, Mogues, and Negatu 200510
Basics of DRM
3
Risk = Hazard x Exposure xSensitivity
Capacity
where represents Vulnerability
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Losses = Risk factor
Recovery = Finance factor
Extent of damage > Available Finance
The biggest financing challenge is availability of liquidity at the onset of a disaster
Rationale for DRM and DRF
• Governments are responsible for large portfolios of public infrastructure assets subject to risk
• Guarantee sufficient capital for emergency relief and assistance to affected households, businesses and communities
• Analyze, measure and manage government's disaster contingent liability– comprehensive approach to embedded contingent risks from
disasters
• Avoid diverting funds from budgets or from already disbursed development loans to finance post-disaster expenses
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Applying DRM
Ex-ante– Development planning,
programs and projects– Existing vulnerability of
populations and their infrastructure
Ex-post– Emergency response– Disaster recovery and
reconstruction
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Risk Assessment
Risk Mitigation
Emergency Preparedness
Institution Building
Risk Financing
Risk Operations
Recovery Process
Reconstruction
Ex ante
Risk event
Ex post
Time
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Country Assets (people, housing, factories, schools…)
Country Assets (people, housing, factories, schools…)
– Collaborate with World Bank to spearhead DRF Technical Working Group
• Viet Nam (2011-14)* JFPR TA for DRF-CCA program
development ($1m)– DRF pilots in two cities– Risk profiling > city selection > DRF
options > implementation– Special focus on DRF/CCA
application
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Phases Key activities
Phase 1 Risk profiling and city selection
Phase 2 Study of potential DRF options
Phase 3 Evaluation/selection of DRF options
Phase 4 Implementation of DRF scheme
* Philippine Earthquake Pool (2011-12)
– ADB acts as catalyst to support private sector pool development
Other Initiatives
• ADB Contingent Credit Program* Emergency stand-by credit is a basic DRF tool* Opportunity costs need to be avoided* Two-tier facility allows new borrowing or reallocation of
undisbursed loan balances
• Microinsurance* ADB active in the Philippines supporting (GIZ, MIPSS)
Microinsurance Innovation Project for Social Security– Developing policy framework at national level– Developing new regulatory framework– Developing financial literacy for microinsurance
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Outline
39
Disaster Risk Management in Developing Member Countries of Asia
Role of Multilateral Agencies in Disaster Risk Financing
An Overview of ADB's Disaster Risk Financing Activities
Key Messages
Q & A
Key Messages
• Strong and continuous political commitment is essential
• Foundation for a unified country plan integrating DRR, DRF, and CCA is central– Local ownership – Value proposition for all the parties (client/donor/industry/ NGOs)
• A “bottoms- up” high quality risk analysis is essential for decision making and risk capital financing
• Risk assessment technology and financial market development create new options for government risk management
• Disaster management (ex-ante+ex-post) as crucial element of sustainable development– Risk reduction initiatives should be integrated into disaster
response and recovery measures 40
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Arup ChatterjeeSenior Financial Sector SpecialistOffice of Regional Economic IntegrationAsian Development BankManila, PhilippinesEmail: [email protected]