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Evaluating sovereign disaster risk finance strategies : a framework

Author

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  • Clarke,Daniel Jonathan
  • Mahul,Olivier
  • Poulter,Richard Andrew
  • Teh,Tse-Ling

Abstract

This paper proposes a framework for ex ante evaluation of sovereign disaster risk finance instruments available to governments for funding disaster losses. The framework can be used by governments to help choose between different financial instruments, or between different combinations of instruments, to achieve appropriate and financially efficient strategies to fund disaster losses, taking into account the risk of disasters, economic conditions, and political constraints. The paper discusses the framework in the context of a hypothetical country, with parameters selected to represent a disaster-prone small island state. The paper shows how a mix of instruments can be chosen to minimize the economic opportunity cost given the underlying disaster risk faced and prevailing economic and financial conditions.

Suggested Citation

  • Clarke,Daniel Jonathan & Mahul,Olivier & Poulter,Richard Andrew & Teh,Tse-Ling, 2016. "Evaluating sovereign disaster risk finance strategies : a framework," Policy Research Working Paper Series 7721, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7721
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    Cited by:

    1. Ilan Noy & Christopher Edmonds, 2019. "Increasing fiscal resilience to disasters in the Pacific," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 97(3), pages 1375-1393, July.
    2. Raj, Praveen Vijaya Raj Pushpa & Nagarajan, Bagathsingh & Schoenherr, Tobias & Ramkumar, M., 2023. "A comparative investigation of a seller’s disaster payment period policy," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 171(C).
    3. Adam, Christopher & Bevan, David, 2020. "Tropical cyclones and post-disaster reconstruction of public infrastructure in developing countries," Economic Modelling, Elsevier, vol. 93(C), pages 82-99.
    4. Joshua B. Horton & Penehuro Lefale & David Keith, 2021. "Parametric Insurance for Solar Geoengineering: Insights from the Pacific Catastrophe Risk Assessment and Financing Initiative," Global Policy, London School of Economics and Political Science, vol. 12(S1), pages 97-107, April.
    5. World Bank Group, 2016. "Disaster Risk Finance as a Tool for Development," World Bank Publications - Reports 24374, The World Bank Group.
    6. Sandrine Spaeter, 2021. "How to Reconcile Pandemic Business Interruption Risk With Insurance Coverage," Working Papers of BETA 2021-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    7. World Bank, 2020. "Catastrophe Insurance Programs for Public Assets," World Bank Publications - Reports 34440, The World Bank Group.
    8. Ionela-Daniela Găitan (Botezatu), 2020. "Comparative Analysis of Post-event Funding Sources," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 333-339, December.

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