Christopher BarhamGlobal Change and Catastrophe Risk

Management: Earthquake Risks in Europe

July 6-9, 2000

New Directions in Disaster

Management at the World Bank

Historical focus on post-disaster lending

• From 1980-2000 Bank loans of US$20 billion for post-cat. reconstruction

• 18% of this for earthquake reconstruction projects

• Increasing awareness of need for risk management in the development agenda

ND Portfolio in US$ billions, 1980-1998

6.3

6.1

1

3.6

3

0 1 2 3 4 5 6 7

Others

Flood

Fire

Earthquake

Drought

Disaster losses rise while ODA declines

• Disaster losses in developing world about $35 bn/year

• ODA for all sources and for all purposes declines to $40 bn/year in 1997

• The arithmetic doesn’t add up: Need to find new ways to manage risk

Central Question• If official aid is insufficient….

• “1998 was the worst year on record for the sheer number of natural disasters. And most destruction to lives and livelihoods was in the developing world. Yet despite this, the international aid flows continue to plunge. The richest countries are becoming less generous as the planet’s poorest become more threatened by…hazards.” World Disaster Report 1999

• …..can we bring market-based instruments to the developing world to proactively manage risk?

The Disaster Management Facility I:

• 1998 Established to incorporate disaster concerns in Bank lending strategies

• 1999 ProVention Consortium: a global partnership to reduce disaster risk in developing countries

As a partner, IIASA models disaster impacts on macroeconomies of selected developing countries

The Disaster Management Facility II:

• Bank’s Country Assistance Strategies beginning to reflect disaster risk and new disaster risk management approaches

• Developing projects on a variety of disaster issues: prevention, risk financing, insurance pooling, weather-related crop insurance, poverty

• Disasters highlighted in World Development Report 2000

Central Challenge: Address public sector risk

•Characteristics of developing countries: underdeveloped financial sector, incomplete insurance markets, low insurance penetration

•Therefore: catastrophe risk largely borne by public sector

•Question: What options are available to governments for disaster management?

Emerging Challenges in Disaster Risk Management

• Clarify principles governing design of national risk management systems

• Develop analytical frameworks for design of national mitigation investment strategies

• Develop methods to establish public sector mechanisms to interface with risk transfer markets

• Develop methods to bring improved risk management to the poor

find out more about the

ProVention Consortium:

www.worldbank.org/html/fpd/urban/provention/index.html