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Disaster Risk Financing: Main Concepts and Evidence from EU Member States

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  • Diana Radu

Abstract

Natural disasters have caused, and will continue to cause, significant losses in the EU Member States. Moreover, climate change is expected to amplify the frequency and intensity of most natural disasters. Governments step-in to cover the disasters-related costs such as emergency relief, recovery and reconstruction. Public authorities also act as insurer of last resort, in particular in those countries where insurance coverage is low. They make payments for legal commitments to cover the costs of disasters, and when there is a moral obligation to provide financial assistance. Natural disasters and climate change thus represent a real and increasing challenge for public finances, adding to fiscal sustainability issues such as a high debt level and an ageing population. There is little evidence on how EU Member States pre-arrange disaster financing and on past disasters financing. This discussion paper aims to provide an overview of relevant concepts for the design of a disaster risk financing strategy. It provides evidence from EU and Member States on disaster financing with a view to inform the debate on strengthening disaster financial resilience.

Suggested Citation

  • Diana Radu, 2021. "Disaster Risk Financing: Main Concepts and Evidence from EU Member States," European Economy - Discussion Papers 150, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:dispap:150
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    File URL: https://economy-finance.ec.europa.eu/publications/disaster-risk-financing-main-concepts-and-evidence-eu-member-states_en
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    References listed on IDEAS

    as
    1. Catherine Gamper & Benedikt Signer & Luis Alton & Murray Petrie, 2017. "Managing disaster-related contingent liabilities in public finance frameworks," OECD Working Papers on Public Governance 27, OECD Publishing.
    2. Marshall Burke & W. Matthew Davis & Noah S. Diffenbaugh, 2018. "Large potential reduction in economic damages under UN mitigation targets," Nature, Nature, vol. 557(7706), pages 549-553, May.
    3. Gabriel Bachner & Birgit Bednar-Friedl & Nina Knittel, 2019. "How does climate change adaptation affect public budgets? Development of an assessment framework and a demonstration for Austria," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 24(7), pages 1325-1341, October.
    4. Tatyana Deryugina, 2017. "The Fiscal Cost of Hurricanes: Disaster Aid versus Social Insurance," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 168-198, August.
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    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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