Disaster Risk Finance : An Operational Guide

More than 1 billion people have lifted themselves out of poverty in the past 15 years, but climate and disaster risks threaten these achievements. Global asset losses from disasters are now reaching an average of more than US$300 billion a year. According to a 2017 World Bank report, the impacts of disasters on well-being are equivalent to a US$520 billion drop in consumption—60 percent more than the asset losses usually reported—and force some 26 million people into poverty every year. Moreover, the negative impacts of disaster and climate shocks are compounded by the increasingly complex threats that countries face, ranging from migration caused by fragility and conflict situations to the risk of pandemics. It is estimated that 93 percent of people facing extreme poverty today live in countries that are politically fragile or environmentally vulnerable, and in many cases both. The United Nations’ 2017 humanitarian appeal, intended to help almost 93 million people affected by conflicts and natural disasters, sought a record US$22.2 billion.

A growing number of governments are moving toward a proactive (and more cost-effective) approach to financial planning, one that protects national budgets as well as the lives and livelihoods of their residents from the impacts of disasters. This approach complements other elements of a comprehensive disaster risk management strategy, ranging from investments in risk reduction to improved preparedness and resilient recovery and reconstruction.