The Impacts of Disaster Risk on Sovereign Asset and Liability Management

This report discusses how Implicit contingent liabilities, such as those generated by natural disasters, are often not quantified in the government balance sheet. Understanding the impacts of disaster risk on sovereign assets and liabilities plays a key part in understanding the potential impact of sovereign disaster risk finance strategies which allow governments to reduce the costs and risks of disasters using prearranged financing and insurance methods. Applying the Sovereign Asset and Liability Management (SALM) framework is a new and comprehensive way of looking at the potential impact of a disaster on the public sector balance sheet through assets and liabilities. This paper introduces a framework that identifies three channels through which natural disaster will impact SALM.