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Risk Financing Is Key to Building Resilience Against Disasters - Study
DELHI, INDIA – Disaster losses have risen faster than Asia-Pacific’s economy has expanded, says a new report from the Asian Development Bank (ADB), which recommends regional governments find ways to offer disaster risk financing instruments such as calamity funds, tax credits, and catastrophe bonds to strengthen disaster resilience.
Video: Why Asia and the Pacific Need Disaster Risk Financing
“Asia’s economic gain is being eroded by disasters, often hitting the poorest hardest,” said Bindu Lohani, ADB’s Vice President for Knowledge Management and Sustainable Development. “As the global region most vulnerable to climate change, we no longer have a choice but to focus on disaster risk management.”
Significant investments to strengthen disaster resilience can reverse this, says Investing in Resilience - Ensuring a Disaster-Resistant Future, which notes that a wide range of gaps and obstacles sit behind the existing trend of rising disaster losses, such as inadequate risk data, weak and misaligned incentives, poor legislative and regulatory frameworks and enforcement, disjointed government, limited funding, and power disparities.
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Natural hazards continue to cause significant loss of life in Asia and the Pacific. Between 1970 and 2010, 1.7 million hazard-related deaths were recorded in the region – 51% of the global total.
The report examines the instruments and mechanisms that currently exist in Asia to protect against disasters, and offers solutions for stronger disaster resilience, including how disaster risks can be financed through disaster risk insurance, reinsurance, catastrophe bonds, and other means.
A wider range of disaster risk financing instruments is particularly crucial for Asia and the Pacific, which lags behind other regions in developing innovative financial solutions for disaster resilience. Less than 5% of disaster losses in developing Asia are insured compared to 40% in developed countries.
To overcome these challenges, the report identifies critical next steps to better assess, reduce and manage disaster risk. This includes the need for national and sub-national governments to develop and implement comprehensive disaster risk financing strategies to provide adequate and timely post-disaster support to strengthen financial resilience.
Most Asian countries have disaster handling capabilities, but few have adequate provisions for financing post-disaster losses and rehabilitation. Disaster losses are expanding at a faster pace in Asia due to environmental degradation, climate change, demographic pressures, and widespread failure to consider disaster risk in designing and locating many critical development investments.