Disaster Risk Finance Instruments: Disaster Reserve Funds

Disaster reserve funds are an important part of an efficient risk-layering approach. They allow governments to retain risk as part of their budget but still set resources aside in advance to facilitate rapid response in case of a shock, with clear prearranged processes and procedures for how the funds can be used.
A fund can be established in different ways. In some countries the reserve fund is just a contingency allocation in the budget with s pecific rules for how these funds will be used. In other countries, a disaster fund is established as a dedicated institution, either a government agency or a de facto semiindependent service agency. In both cases, a disaster fund aims to improve disaster outcomes by (i) ensuring effective access to sufficient resources for disaster response; and (ii) streamlining execution and transparency of spending.