Evaluating Sovereign Disaster Risk Finance Strategies: A Framework

Daniel Clarke, Olivier Mahul, Richard Poulter and Tse-Ling Teh
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Olivier Mahul: World Bank
Richard Poulter: World Bank
Tse-Ling Teh: The London School of Economics and Political Science

The Geneva Papers on Risk and Insurance - Issues and Practice, 2017, vol. 42, issue 4, No 2, 565-584

Abstract: 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. In doing so, the framework takes 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 minimise the economic opportunity cost given the underlying disaster risk faced and prevailing economic and financial conditions.

Keywords: disaster risk financing; natural hazards; financial analysis; insurance; contingent credit (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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Working Paper: Evaluating sovereign disaster risk finance strategies: a framework (2016)
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DOI: 10.1057/s41288-017-0064-1

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