I had just arrived to Bali at a late hour in the evening to join the 2018 World Bank-IMF annual meetings when our group, visitors from more than 189 countries along with Indonesians on the island and neighboring communities were acutely woken up at dawn with magnitude 6.4 quake that struck off the coast. Early reports by the National Disaster Mitigation Agency indicated extensive damage to infrastructure and loss of lives in the span of a few minutes. The Indonesian response that followed revealed the difference disaster risk finance can bring to families, economies and societies at large. I was humbled by what I experienced and what we can contribute -as an institution together with our partners- to manage these acute disasters more prudently, effectively and humanely.
Less than a year later, our team at the World Bank Group’s Finance, Competitiveness and Innovation Global Practice contributed a paper to the G20 discussions: “Boosting Financial Resilience to Disaster Shocks: Good Practices and New Frontiers.” This stock-taking note is being presented at the G20 Finance Ministers and Central Bank Governors later this week. It is equally critical to advocate for investments in physical and social resilience.
Today, existing regional facilities in Africa, the Pacific and the Caribbean have developed new financial products, responding to specific demands from participating countries. The Southeast Asia Disaster Risk Insurance Facility (SEADRIF) sets a new milestone in the development of regional solutions for financial resilience. It has been designed as a platform for regional collaboration, financial innovation and investment in public goods supporting the needs of both Southeast Asian middle-income countries and those, where capacity remains a challenge. New technology and innovations such as Earth Observation Data, Fintech and Big Data have the potential to significantly enhance and boost systems of financial resilience against disaster shocks. With countries at varying levels of development, some may require incentives such as those being offered by the newly established Global Risk Financing Facility (GRiF); which help public interventions maximize the impact of disaster risk finance and insurance solutions.
Recent experiences of G20 countries and others have led to new frontiers on innovative crisis and disaster risk finance.From public health shocks, cyber risks and risks of conflict to famine, displacement and migration, the growing awareness and strengthened management of multiple sources of real-world risks by finance officials will likely lead to increased consideration of government-wide financial risks.
This momentum is still very new but growing fast. Disaster risk finance in many countries is still facing limitations and challenges.These stakeholders today share a common narrative that can raise risk capital, develop mechanisms to reach beneficiaries and maintain an innovative pace to expand financial solutions.
Over recent years, we have seen solidarity building up and attitudes shifting towards disaster management. Once a confined challenge to geographical zones, disaster today more than ever before, is about more frequent events of dire magnitude and dramatic repercussions on a society’s survival, economy, infrastructure and recovery. Where the level of awareness is higher, there is a deeper understanding across stakeholders of liabilities, and what it takes to respond and to set up recovery mechanisms. This is how disaster can be more effectively managed.
I’m delighted that this focus on disaster risk finance continues under the G20 and is a priority for our work at the World Bank Group signaling a clear statement on behalf of our shareholders, client countries and partners to contribute and advance this momentum. Our support in countries and globally is showing evidence of good practice to confront disasters relying on inclusive approaches that can respond to the immediate needs of the sick and the healthy, the wealthy and the poor, the child and the adult, the old and the young.
We all need to pull together on a global basis. Countries leading the way need to work with those trying to catch up. Disaster risk financing is no longer a vague concept. No single financial instrument can meet funding needs for all risks. Advances in data and analytics, timeliness of funding, risk layering, raising capital and managing recovery are driving the momentum in many countries whose future depends on how successful they are in adopting these good practices and setting the example for others to follow.