Early warning Early action

Early recovery: the Community Early Recovery Voucher

CERVO

Ulrich Hess, Chief Risk Reduction & Disaster Mitigation, WFPNiels Balzer, DRR Officer, WFP

WFP

The need: predictable Disaster The need: predictable Disaster RecoveryRecovery

Vulnerable People expect disaster recovery to be

• Predictable: “guaranteed” benefits without hassle

• Timely: swift payout/hand-outs

• Objective: clear verifiable basis for payouts and no discrimination

Natural DisastersNatural Disasters• Recurrent, more frequent

• Big three (drought, flood, wind) cause most of the misery and relief costs

• 2.6 billion people at risk (WB IEG)

• 177 million people affected in 2007 (CRED)

• Around half of WFP budget goes to natural disaster relief and rehabilitation

The Mechanism: CERVOThe Mechanism: CERVO• delivered via trusted delivery channel to vulnerable

people• redeemable when triggered by objective index

(based on public Weather Station or Satellite data) immediately after weather shock

• Standardized payouts for one-in-seven and one-in-ten flood, drought, wind)

• targeted to those communities that systematically reduce disaster risk

• Costs only small transaction coverage fee – risk cost are paid by government and donors

Hurricane Example: BelizeHurricane Example: Belize

50 mile radius

CERVOVo Hurricane Payout Table

Windspeed Category

Distance over water (Miles)

  50 60 70 80

Windstorm $20 0 0 0

CAT 1: $40 $20 0 0

CAT 2: $60 $30 $20 0

CAT 3: $80 $40 $30 $20

CAT 4: $100 $60 $40 $30

CAT 5: $200 $100 $60 $40

Index: Storm Tracker products (NOAA, others)

Flood Example: GhanaFlood Example: Ghana– Basis: Flood Risk Mapping– Flood Detection: Spatial Aperture Radar technology

• Low Resolution flood detection mask• Extreme Precipitation triggers High Resolution Image

(Response time: between 18 and 36 hours)• Revisit time: less than 12 hours in case of a crisis

– GPSing of CERVO buyer + cell phone number for early warning and payout notification

– Payout if CERVO gridcell of 1x1km is to 80% inundated

Drought Example: El SalvadorDrought Example: El Salvador

Basis: 12 month Standard Precipitation Index

Payouts for:• Severe drought:

$US 50• Extreme drought:

$US 100• Catastrophic drought:

$US 200

Severity

Classification of severity of

drought

Minor Drought

Moderate Drought

Severe Drought

Extreme Drought

Exceptionally Bad Drought

DistributionDistribution

• Rural Post Offices, Banks

• Microfinance institutions (possibly via Smart Cards),

• Agricultural cooperatives, Input suppliers, Traders

• WFP offices, sub-offices, associated NGOs

Farmer

MICROSOFT CORPORATION

Coupon

Global CaRe Voucher Risk PoolReinsurance/Capital

Markets

Intermediary

Insurer

$$

Country Border

$

Cell phone number+ Location: (Lat., Long.)

Explanation of terms

+

+

Risk transfer paymentsRisk transfer payments

Donor + Gov Matching funds

$

Master CERVO

Community

FarmerMICROSOFT CORPORATION

Coupon

Global CaRe Voucher Risk PoolReinsurance/Capital

Markets

Intermediately Agent

Insurer

$$$

Pay

out

$$$

Pay

out

Country Border

$$$ payout

Notification of arrival of money

$

Early Warning: via Cell phone or radio

CERVO PayoutsCERVO Payouts

CERVO cost sharingCERVO cost sharing

“Normal” pure Risk Premium

(average payout)

Risk Pooling

Climate Change

CAT Risk Transfer

8 USD

2 USD

5 USD

2 USD Bond?

Donor and Premium funded

CC adaptation funds

Final Cost for household

Total Risk Transfer Cost

1 USD

Government + Donors premium

support