ADB to Help Develop Regional Disaster Risk Insurance Schemes

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is funding a project that will look at creating risk insurance schemes designed to improve the region’s ability to cope with natural disasters.

The Japan Special Fund, through ADB, has provided a grant of $800,000 to the project. It includes a conference in Tokyo on November 4 to bring together international experts and study various risk transfer mechanisms including regional risk pooling, which could help ease the financial burden from natural disasters.

The conference will be followed by two workshops on November 5 running concurrently. The first workshop will explore the special needs of Asia’s megacities. The second workshop will consider the viability of establishing a risk insurance scheme for the Pacific Island countries.

The conference is sponsored jointly by ADB and the Ministry of Finance of Japan.

At present, many developing countries in the Asia-Pacific region - which are typically the most vulnerable to natural disasters - lack the resources to protect them from catastrophic loss.

“Natural disasters place a substantial financial burden on developing member country governments which contribute to fiscal and economic volatility,” said Neil Britton, an ADB Senior Disaster Risk Management Specialist.

A 2005 estimate put the cost of rebuilding infrastructure and restoring the economic momentum of disaster-hit countries at $15 billion a year.

With the number of natural disasters growing annually, many of them in Asia and the Pacific, there is a need to find insurance and financing mechanisms that spread the risk among countries.

Risk insurance pooling - which refers to risk sharing agreements under which each participant in the group, or pool, assumes a specified portion of risk - has been adopted by many developed countries in the region but is a relatively new initiative for developing nations.

At the regional level there is one such scheme covering Caribbean countries developed by the World Bank, but the option has not been adopted in Asia and the Pacific. Many small and low-lying Pacific Islands face the greatest risk from natural disasters, including the threat of rising sea levels, caused by global warming. The Pacific Island workshop, which is also co-sponsored by the World Bank, will explore whether a pooling scheme is feasible for this region.

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