HR: 13:50h
AN: U53B-01    [Abstracts]
TI: Disaster Risk Transfer for Developing Countries
AU: * LinneroothBayer, J
EM: bayer@iiasa.ac.at
AF: International Institute for Applied Systems Analysis (IIASA), Schlossplatz 1, Laxenburg, 2361 Austria
AU: Mechler, R
EM: mechler@iiasa.ac.at
AF: International Institute for Applied Systems Analysis (IIASA), Schlossplatz 1, Laxenburg, 2361 Austria
AU: Pflug, G
EM: pflug@iiasa.ac.at
AF: International Institute for Applied Systems Analysis (IIASA), Schlossplatz 1, Laxenburg, 2361 Austria
AU: Hochrainer, S
EM: hochrain@iiasa.ac.at
AF: International Institute for Applied Systems Analysis (IIASA), Schlossplatz 1, Laxenburg, 2361 Austria
AB: Financing disaster recovery often diverts resources from development, which can have long-term effects on economic growth and the poor in developing countries. Moreover, post-disaster assistance, while important for humanitarian reasons, has failed to meet the needs of developing countries in reducing their exposure to disaster risks and assuring sufficient funds to governments and individuals for financing the recovery process. The authors argue that part of disaster aid should be refocused from post-disaster to pre-disaster assistance including financial disaster risk management. Such assistance is now possible with new modeling techniques for estimating and pricing risks of natural disasters coupled with the advent of novel insurance instruments for transferring catastrophe risk to the global financial markets. The authors illustrate the potential for risk transfer in developing countries using the IIASA CATSIM model, which shows the potential impacts of disasters on economic growth in selected developing countries and the pros and cons of financial risk management to reduce those adverse impacts. The authors conclude by summarizing the advantages of investing in risk-transfer instruments (coupled with preventive measures) as an alternative to traditional post-disaster donor assistance. Donor-supported risk-transfer programs would not only leverage limited disaster aid budgets, but would also free recipient countries from depending on the vagaries of post-disaster assistance. Both the donors and the recipients stand to gain, especially since the instruments can be designed to encourage preventive measures. Precedents already exist for imaginative risk-transfer programs in highly exposed developing countries, including national insurance systems, micro-insurance schemes like weather derivatives and novel instruments (e.g., catastrophe bonds) to provide insurance cover for public sector risks.
DE: 1616 Climate variability (1635, 3305, 3309, 4215, 4513)
DE: 6349 General or miscellaneous
SC: Union [U]
MN: Fall Meeting 2005