This report addresses the large floodexposures of Central Europe and proposes efficient financialand risk transfer mechanisms to mitigate fiscal losses fromnatural catastrophes.. The report is primarily addressed tothe governments of the region which should build into theirfiscal planning, the necessary contingent fundingmechanisms, based on their exposures. While there existpan-European mechanisms such as the EU Solidarity Fund tohelp EU members fund mega disasters, these only kick in atextremely high loss levels. Given these issues, theGovernments of the V-4 countries should consider it apriority to set up risk transfer mechanisms to reduce fiscalvolatility following natural catastrophes. The privatesector insurance markets in the V-4 countries appearadequate and reflect rather high levels of penetration inthe economy and in the housing sector. Economic and fiscalanalyses based on global data also show that countries withinsurance mechanisms and markets show a stronger GDPrecovery path and lower fiscal deficits following adisaster. However, the V-4 countries, having a common hazardof flood, are in a unique position to develop highly costeffective flood insurance mechanisms. As countries ingeneral are more concerned with supplemental fiscalresources rather than individual property losses, thegovernments of the V-4 countries can consider parametricstyle contracts. Nevertheless, risk transfer or insurancemechanisms are not the only types that need to beconsidered.The analysis in this report is meant to show,besides the financial mechanisms that would be beneficialfor risk management, what large catastrophe exposures existand their relation to government finances and macroeconomicmeasures. Following a final phase of feasibility analysisand market testing, the V-4 countries should thus considerestablishing a multi-country insurance pool to provide fastemergency funding after disasters.
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