Assessing the Financial Vulnerability to Climate-Related Natural Hazards

Mechler, Reinhard ; Hochrainer, Stefan ; Pflug, Georg ; Lotsch, Alexander ; Williges, Keith

关键词: AGENTS;    AGRICULTURAL INSURANCE;    ALLOCATION;    BANK CREDIT;    BASIS POINTS;   

DOI  :  10.1596/1813-9450-5232
RP-ID  :  WPS5232

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

National governments are key actors inmanaging the impacts of extreme weather events, yet manyhighly exposed developing countries -- faced with exhaustedtax bases, high levels of indebtedness, and limited donorassistance -- have been unable to raise sufficient andtimely capital to replace or repair damaged infrastructureand restore livelihoods after major disasters. Suchfinancial vulnerability hampers development and exacerbatespoverty. Based on the record of the past 30 years, thispaper finds many developing countries, in particular smallisland states, to be highly financially vulnerable, andexperiencing a resource gap (net disaster losses exceed allavailable financing sources) for events that occur with aprobability of 2 percent or higher. This has three mainimplications. First, efforts to reduce risk need to beramped-up to lessen the serious human and financial burdens.Second, contrary to the well-known Arrow-Lind theorem, thereis a case for country risk aversion implying that disasterrisks faced by some governments cannot be absorbed withoutmajor difficulty. Risk aversion entails the ex antefinancing of losses and relief expenditure through calamityfunds, regional insurance pools, or contingent creditarrangements. Third, financially vulnerable (and generallypoor) countries are unlikely to be able to implementpre-disaster risk financing instruments themselves, and thusrequire technical and financial assistance from the donorcommunity.The cost estimates of financial vulnerability --based on today's climate --inform the design of"climate insurance funds" to absorb high levels ofsovereign risk and are found to be in the lower billions ofdollars annually, which represents a baseline for theincremental costs arising from future climate change.