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Disaster Risk: Using Capital Markets to Protect Against the Cost of Catastrophes

Michael Bennett's picture
Hurricane Sandy / NOAA
Hurricane Sandy / NOAA


In addition to their often devastating human toll, natural disasters can have an extremely adverse economic impact on countries. Disasters can be particularly calamitous for developing countries because of the low level of insurance penetration in those countries. Only about 1% of natural disaster-related losses between 1980 and 2004 in developing countries were insured, compared to approximately 30% in developed countries. This means the financial burden of natural disasters in developing countries falls primarily on governments, which are often forced to reallocate budget resources to finance disaster response and recovery. At the same time, their revenues are typically falling because of decreased economic activity following a disaster. The result is less money for government priorities like education or health, thereby magnifying the negative developmental impact of a disaster.

To address this problem, the World Bank Treasury has been helping our clients protect their public finances in the event of a natural disaster. The most recent innovation is our new Capital-at-Risk Notes program, which allows our clients to access the capital markets through the World Bank to hedge their natural disaster risk. Under the program, the World Bank issues a bond supported by the strength of our own balance sheet, and hedges it through a swap or similar contract with our client. The program allows us to transfer risks from our clients to the capital markets, where interest in catastrophe bonds is growing.

Shaping the Debate on Promoting Jobs and Competitiveness in Small Island Developing States

Ivan Rossignol's picture

The United Nations has declared 2014 as the International Year of Small Island Developing States (SIDS), in recognition of the contributions this group of countries has made to the world, and to raise awareness of the development challenges they confront – including those related to climate change and the need to create high-quality jobs for their citizens.

The Third International Conference on SIDS in September in Apia, Samoa will be the highlight event.  The World Bank Group is helping shape the debate on both climate and jobs with a delegation led by Rachel Kyte, the Group Vice President and Special Envoy for Climate Change, and with senior-level participation in the conference’s Private Sector Forum.

Is the global jobs agenda relevant to small islands states?

Tackling the challenges related to the jobs agenda in large and middle-income countries could be seen as the most significant issue for the Bank Group’s new Trade and Competitiveness Global Practice, of which I’m a member. Yet the Minister of Finance of Seychelles recently challenged my thinking on this. 

At the June 13  joint World Bank Group-United Nations' High-Level Dialogue on Advancing Sustainable Development in SIDS (which precedes the September conference on SIDS), the presentation by Pierre Laporte, the Minister of Finance, Trade and Investment of Seychelles – who is also the chair of the Small States Forum – led to a lively discussion on various job-creation and growth models that the SIDS countries may want to pursue. 

The sentiment among SIDS leaders was that one-size-fits-all solutions will not do when it comes to jobs and growth.  Yes, they do want to continue to address the tough fiscal challenges they face, but they want to tackle them while creating job opportunities for their citizens. 

Decades of reforms have not helped SIDS grow at a rate similar to the rest of the world: On average, their pace of job creation is about half the global rate. The lack of opportunities felt by many generations resulted in a heavy “brain drain” that exceeds the level seen in other developing countries. 

It is becoming very clear that business as usual in SIDS will not do.  Creative solutions need to be found now.

Latin America and the Caribbean: Back to Normal?

José Juan Ruiz Gómez's picture


The ritual publication by the leading multilateral organizations, think tanks and investment banks on the macroeconomic outlook for Latin America and the Caribbean which, without being too dramatic, puts an end to the era of growth rates above the region’s potential, has inevitably attracted the interest of policymakers, investors and the public in general.

Helping Green Business in the Caribbean

Herbert Samuel's picture


Increased hurricane activity and rising sea levels are well-known effects of climate change, and they prompt solemn head-shaking when we read about them in reports. But in the Caribbean they are part of a terrifying reality that is happening now: This reality was demonstrated again by recent flooding and landslides in the Eastern Caribbean that left 20 dead and hundreds of millions of dollars in damage.

Good Lord! Are we stuck in time?

Kerry Natelege Crawford's picture
Photo by Chico Ferreira, available under a Creative Commons license (CC BY 2.0).
(Photo by Chico Ferreira, available under a Creative Commons license - CC-BY-2.0)

Jamaica + Animation: A match made in heaven

Mary Stokes's picture
At university in the US, animation graduate Kira Clayton was always asked what career opportunities she would have when she returned to her native Jamaica.
 
Now, after a a week’s intensive animation workshop from the best in the business, she is on the best path to a career and is looking forward to a summer program scholarship at Sheridan College in Ontario, Canada.
Animation & Jamaica: A match made in heaven

What’s getting in the way of Latin America becoming a food superpower?

John Nash's picture



The United Nations estimates that with the population reaching 9 billion by 2050, global food demand will double, with much of that growth in developing countries. 
 
While the gloom-and-doom predictions of Malthus and a long line of neo-Malthusians have failed to materialize, still, one does have to wonder how all those hungry mouths are going to be fed.
 
What will it take to ensure that the recent food crises do not become permanent features of the world of the future?  While countries in Latin America and the Caribbean are quite heterogeneous in their production potential, overall they are well equipped to contribute to meeting this challenge.

Trinidad & Tobago: Stephon Gabriel wins Voices4Climate competition

Mary Stokes's picture

Stephon Gabriel was overjoyed when an email popped up in his inbox announcing he had won the World Bank's Voices4Climate competition. One of 19 winners from 14 countries, his music video 'A Changing World' beat more than one thousand other music videos, photos and videos to the top prize.

Talking after the award ceremony, the young producer from Trinidad and Tobago described how he had become inspired to write the song after seeing how climate change is already affecting his native Caribbean. It was then that the words and music began to flow as he sought to "sensitise the listener around climate change."

Belize Looking to Neighbors and PPCR to Build Climate Resilience

Justin Locke's picture

 Bishwa Pandey/World Bank

Photo: Bishwa Pandey/World Bank

Like other countries in the Eastern Caribbean region, Belize is highly vulnerable to natural hazards such as coastal and inland flooding, high winds, fire, and drought, all of which are being exacerbated by climate change. And like its neighbors, Belize is doing something about it. Following the lead of other Caribbean countries involved in the Pilot Program for Climate Resilience (PPCR), Belize is initiating a comprehensive climate resilience investment plan that spans across sectors to mainstream climate change in its national development planning and action.

Drive on any of Belize’s four main highways and you will quickly understand how tough it is to maintain this main network connecting Belmopan and Belize City, the two key economic zones. Frequent floods impede commuting and the transportation of goods and can cut off the population for several days. It’s only going to get worse, as recent studies indicate that Belize will undergo a warming and drying trend and is expected to endure even more frequent and intense rainfalls. Seventy percent of its people live in low-lying areas prone to recurrent flooding, so reducing vulnerability to natural disasters is at the core of Belize’s development challenge.

It is a lot for one nation to face alone. That is why the government of Belize is reaching out to the international community for support and guidance on setting a path toward long-term solutions to protect its population and maintain economic prosperity. When the government of Belize approached the World Bank to support them on improving climate resilience, I was excited to see how we could apply lessons learned from other Eastern Caribbean countries involved in the PPCR to help Belize develop its own investment plan in support of a national climate-resilient development path.

Latin America: Making sure anti-tobacco efforts don’t go up in smoke

Joana Godinho's picture

También disponible en español


Today is No Tobacco Day, a moment in time when we’re supposed to remind ourselves of the many evils smoking brings upon us both as individuals and as member of society.

So when I started drafting this blog I asked myself: why can’t we have a No Tobacco Month, or even better a No Tobacco Lifetime? In other words, why are we not already enjoying a tobacco-free world or a tobacco-free Latin America?


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