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.
These are some of the views and reports relevant to our readers that caught our attention this week.
Pew Research Internet Project
As Internet experts look to the future of the Web, they have a number of concerns. This is not to say they are pessimistic: The majority of respondents to this 2014 Future of the Internet canvassing say they hope that by 2025 there will not be significant changes for the worse and hindrances to the ways in which people get and share content online today. And they said they expect that technology innovation will continue to afford more new opportunities for people to connect. Still, some express wide levels of concern that this yearning for an open Internet will be challenged by trends that could sharply disrupt the way the Internet works for many users today as a source of largely unfettered content flows.
Good Governance- A Sustainable Development Goal Too Essential To Be Side-lined
What do the public in the USA, UK, France and Germany consider the greatest impediment to global development? According to new research by the Gates Foundation and partners released at the InterAction forum last month called the Narrative Project, the answer is corruption. Additionally, a recent Gallup poll showed that, around the world, satisfaction with "freedom" is inversely proportional to the perception of corruption in a given country. The answer to corruption is good governance, at the national and local levels. But governance goes well beyond just stopping corruption. It is the cornerstone of individual freedom, political participation, secures the rights of the individual and the media, and makes politicians accountable to their constituencies.
Our response to climate change at the global level clearly needs improving. While some governments are managing to set and enforce limits on the emission of greenhouse gases, an international agreement that is both enforceable and meaningful remains elusive. Measures undertaken by private individuals and organizations, though plentiful, largely fail to connect to the political process and continue to fall short in aggregate. Is there a way to combine these public and private efforts? We think there is, as we’ve explored in a recent NZZ article and ETH blog post: a new type of liability insurance.
Looking to the insurance industry for addressing climate change is not new (see, for example, Nobel Laureate Robert Shiller’s column; the Geneva Association’s statement; and the climate change and insurance links discussed at the World Bank’s recent Understanding Risk conference). What has been lacking, however, are ideas for employing insurance instruments at scale, across national boundaries, and in a way that maximizes existing capacities and market mechanisms.
Back in March 2014, I had the opportunity to be part of a World Bank team supporting the Tongan government to develop a reconstruction policy after Tropical Cyclone Ian hit earlier this year. To implement the policy, the Ministry of Infrastructure led a series of surveys to inform housing reconstruction. This post, which does not intend to be scientific or exhaustive, is to share some of the key lessons I learned from this experience.
Damage assessments are routine in the aftermath of disasters, but they differ depending on their objectives (Hallegatte, 2012 - pdf). A rapid survey in the wake of a disaster event could help to estimate grossly the direct human and economic losses and damages. This type of survey is best to capture the amplitude and the severity of the disaster. However, such survey could present some flaws, often because the survey will be conducted in a very short time frame with minimal design. On the other hand, a survey conducted a few months after the event is best to understand better the context of the disaster. It also allows a better design and better preparation. But, equally, such survey could include biases. For instance, the time lag between the event and the survey itself could create some level of challenges. Most likely, people would have started to fix their houses or have moved away from the affected area, and that will add a layer of complexity to the survey.
Regular FP2P readers will be (heartily sick of) used to me banging on about the importance of ‘killer facts‘ in NGO advocacy and general communications. Recently, I was asked to work with some of our finest policy wonks to put together some crib sheets for Oxfam’s big cheeses, who are more than happy for me to spread the love to you lot. So here are some highlights from 8 pages of KFs, with sources (full document here: Killer fact collection, June 2014).
In 1999, the state of Odisha, India, was hit by the most powerful tropical cyclone ever recorded in the North Indian Ocean, causing nearly 10,000 fatalities and US$5 billion in damages. For the next decade, the government of Odisha and partners worked to identify and mitigate cyclone risk. When the similarly intense Cyclone Phailin struck Odisha in October 2013, the region counted 99.6% fewer deaths.
We cannot prevent a monsoon or cyclone from striking – and as population growth, urbanization, and climate change are on the rise, the frequency and impact of natural disasters will increase. But with innovation, collaboration and a better understanding of risk, we can build communities that are more resilient to natural hazards.
In the morning of January 11, 2014, after an early warning from the Department of Meteorology and the National Disaster Management Office on the upcoming category 5 tropical cyclone Ian, power and radio transmission went off on the Island of Ha’apai, one of the most populated among the 150 islands of the Tongan archipelago in the South Pacific.
The Pacific Islands are inherently prone to hazards due to their geographic location and small size. Each year Pacific Island countries experience damage and loss caused by natural disasters estimated at an average $284 million, or 1.7% of regional GDP (World Bank 2013). In the coming decades, climate change is expected to make things worse through sea level rise and more intense cyclones.