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disaster

New project uses satellites for rapid assessment of flood response costs

Antoine Bavandi's picture

High-risk areas for natural disasters are home to 5 billion out of the 7 billion total people on our planet.

Overall global losses from natural disasters such as floods, landslides or earthquakes amount to about $300 billion annually. A rapid and early response is key to immediately address the loss of human life, property, infrastructure and business activity.

Severe flooding occurred during the 2011 monsoon season in Thailand, resulting in more than 800 deaths. About 14 million people were affected, mostly in the northern region and in the Bangkok metropolitan area.

After such natural disasters, it is important that governments rapidly address recovery efforts and manage the financial aspects of the disaster’s impacts. Natural disasters can cause fiscal volatility for national governments because of sudden, unexpected expenditures required during and after an event.

This is especially critical in emerging-market economies, such as those in Southeast Asia, which have chronic exposure to natural disasters. To conserve and sustain development gains and analyze societal and financial risks at a national or regional scale, it is also critical to understand the impacts of these disasters and their implications at the socioeconomic, institutional and environmental level.
 
New project to monitor and evaluate flood severity

Financed by the Rockefeller Foundation, this World Bank Group’s Disaster Risk Financing and Insurance Program (DRFIP) and Columbia University’s Earth Institute joint project aims to define an operational framework for the rapid assessment of flood response costs on a national scale.  Bangladesh and Thailand serve as the initial demonstration cases, which will be expanded to other Southeast Asian countries such as Cambodia, Lao PDR, Myanmar and Vietnam.

Disaster risk and climate threats: Taking action to create better financial solutions

Olivier Mahul's picture

As the people of Vanuatu begin the painstaking task of assessing the damage to their homes, businesses, and their communities in the wake of Cyclone Pam, another assessment is underway behind the scenes.

Given the intensity of the category 5 storm and the reports of severe damage, the World Bank Group is now exploring the possibility of a rapid insurance payout to the Government of Vanuatu under the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI). 

The Pacific catastrophe risk insurance pilot stands as an example of what’s available to protect countries against disaster risks. The innovative risk-pooling pilot determines payouts based on a rapid estimate of loss sustained through the use of a risk model. 

The World Bank Group acts as an intermediary between Pacific Island countries and a group of reinsurance companies – Mitsui Sumitomo Insurance, Sompo Japan Insurance, Tokio Marine and Nichido Fire Insurance and Swiss Re. Under the program, Pacific Island countries – such as Vanuatu, the Cook Island, Marshall Islands, Samoa and Tonga – were able to gain access to aggregate risk insurance coverage of $43 million for the third (2014-2015) season of the pilot. 

Japan, the World Bank Group, and the Secretariat of the Pacific Community (SPC) partnered with the Pacific Island nations to launch the pilot in 2013. Tonga was the first country to benefit from the payout in January 2014, receiving an immediate payment of US $1.27 million towards recovery from Cyclone Ian. The category 5 cyclone hit the island of Ha’apai, one of the most populated of Tonga’s 150 islands, causing $50 million in damages and losses (11 percent of the country’s GDP) and affected nearly 6,000 people.

Globally, direct financial losses from natural disasters are steadily increasing, having reached an average of $165 billion per year over the last 10 years, outstripping the amount of official development assistance almost every year. Increasing exposure from economic growth, and urbanization—as well as a changing climate—are driving costs even further upward. In such situations, governments often find themselves faced with pressure to draw funding away from basic public services, or to divert funds from development programs.


Investing in Innovative Financial Solutions

The World Bank Group and other partners have been working together successfully on innovative efforts to scale up disaster risk finance. One important priority is harnessing the knowledge, expertise and capital of the private sector. Such partnerships in disaster risk assessment and financing can encourage the use of catastrophe models for the public good, stimulating investment in risk reduction and new risk-sharing arrangements in developing countries.

The Caribbean Catastrophe Risk Insurance Facility (CCRIF) is another good example of the benefits of pooled insurance schemes, and served as the model for the Pacific pilot. Launched in 2007, this first-ever multi-country risk pool today operates with sixteen participating countries, providing members with aggregate insurance coverage of over $600 million with 8 payments made over the last 8 years totaling of US$32 million. As a parametric sovereign risk transfer facility, it provides member countries with immediate liquidity following disasters.

We also know that better solutions for disaster risk management are powered by the innovation that results when engineers, sector specialists, and financial experts come together to work as a team. The close collaboration of experts in the World Bank Group has led to the rapid growth of the disaster risk finance field, which complements prevention and risk reduction.