Assessing the Financial Vulnerability to Climate-Related Natural Hazards

Mechler, Reinhard; Hochrainer, Stefan; Pflug, Georg; Lotsch, Alexander; Williges, Keith

dc.creator	Mechler, Reinhard
dc.creator	Hochrainer, Stefan
dc.creator	Pflug, Georg
dc.creator	Lotsch, Alexander
dc.creator	Williges, Keith
dc.date	2012-03-19T18:38:33Z
dc.date	2012-03-19T18:38:33Z
dc.date	2010-03-01
dc.date.accessioned	2023-02-17T21:02:17Z
dc.date.available	2023-02-17T21:02:17Z
dc.identifier	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100303092429
dc.identifier	http://hdl.handle.net/10986/3718
dc.identifier.uri	http://localhost:8080/xmlui/handle/CUHPOERS/244682
dc.description	National governments are key actors in managing the impacts of extreme weather events, yet many highly exposed developing countries -- faced with exhausted tax bases, high levels of indebtedness, and limited donor assistance -- have been unable to raise sufficient and timely capital to replace or repair damaged infrastructure and restore livelihoods after major disasters. Such financial vulnerability hampers development and exacerbates poverty. Based on the record of the past 30 years, this paper finds many developing countries, in particular small island states, to be highly financially vulnerable, and experiencing a resource gap (net disaster losses exceed all available financing sources) for events that occur with a probability of 2 percent or higher. This has three main implications. First, efforts to reduce risk need to be ramped-up to lessen the serious human and financial burdens. Second, contrary to the well-known Arrow-Lind theorem, there is a case for country risk aversion implying that disaster risks faced by some governments cannot be absorbed without major difficulty. Risk aversion entails the ex ante financing of losses and relief expenditure through calamity funds, regional insurance pools, or contingent credit arrangements. Third, financially vulnerable (and generally poor) countries are unlikely to be able to implement pre-disaster risk financing instruments themselves, and thus require technical and financial assistance from the donor community. The cost estimates of financial vulnerability -- based on today's climate -- inform the design of "climate insurance funds" to absorb high levels of sovereign risk and are found to be in the lower billions of dollars annually, which represents a baseline for the incremental costs arising from future climate change.
dc.language	English
dc.relation	Policy Research working paper ; no. WPS 5232
dc.rights	CC BY 3.0 IGO
dc.rights	http://creativecommons.org/licenses/by/3.0/igo/
dc.rights	World Bank
dc.subject	AGENTS
dc.subject	AGRICULTURAL INSURANCE
dc.subject	ALLOCATION
dc.subject	BANK CREDIT
dc.subject	BASIS POINTS
dc.subject	BUDGET CONSTRAINT
dc.subject	BUDGET DEFICIT
dc.subject	CAPITAL MOVEMENTS
dc.subject	CAPITAL STOCK
dc.subject	CATASTROPHE BOND
dc.subject	CATASTROPHE BONDS
dc.subject	CATASTROPHE INSURANCE
dc.subject	CATASTROPHE REINSURANCE
dc.subject	CATASTROPHES
dc.subject	CATASTROPHIC EVENT
dc.subject	CATASTROPHIC EVENTS
dc.subject	CATASTROPHIC LOSS
dc.subject	CATASTROPHIC RISKS
dc.subject	CENTRAL BANK
dc.subject	CENTRE FOR RESEARCH ON THE EPIDEMIOLOGY
dc.subject	CLEAN ENVIRONMENT
dc.subject	CLIMATE
dc.subject	CLIMATE CHANGE
dc.subject	CLIMATE EXTREMES
dc.subject	CLIMATE INSURANCE
dc.subject	CLIMATE INSURANCE INITIATIVE
dc.subject	CLIMATE VARIABILITY
dc.subject	COMMERCIAL BANKS
dc.subject	CONTINGENT DEBT
dc.subject	COST ESTIMATES
dc.subject	COSTS OF INSURANCE
dc.subject	COUNTRY DEBT
dc.subject	COUNTRY RISK
dc.subject	CRED
dc.subject	CREDIT ARRANGEMENTS
dc.subject	CREDIT MARKETS
dc.subject	CREDIT POLICY
dc.subject	CURRENCY UNITS
dc.subject	DAMAGES
dc.subject	DEBT
dc.subject	DEBT ISSUES
dc.subject	DEFICIT FINANCING
dc.subject	DEVASTATION
dc.subject	DEVELOPING COUNTRIES
dc.subject	DEVELOPING COUNTRY
dc.subject	DEVELOPMENT BANK
dc.subject	DEVELOPMENT ECONOMICS
dc.subject	DISASTER
dc.subject	DISASTER AID
dc.subject	DISASTER EVENT
dc.subject	DISASTER EVENTS
dc.subject	DISASTER INSURANCE
dc.subject	DISASTER PRONE COUNTRIES
dc.subject	DISASTER RELIEF
dc.subject	DISASTER RISK
dc.subject	DISASTER RISK FINANCING
dc.subject	DISASTER RISKS
dc.subject	DISASTERS
dc.subject	DISTRIBUTION OF INCOME
dc.subject	DIVERSIFIED PORTFOLIO
dc.subject	DOMESTIC BOND
dc.subject	DOMESTIC BONDS
dc.subject	DOMESTIC CREDIT
dc.subject	DOMESTIC FINANCIAL MARKETS
dc.subject	DOMESTIC GOVERNMENT BONDS
dc.subject	DONOR COMMUNITY
dc.subject	DROUGHT
dc.subject	EARTHQUAKE
dc.subject	EARTHQUAKES
dc.subject	ECONOMIC ACTIVITY
dc.subject	ECONOMIC DEVELOPMENT
dc.subject	ECONOMIC GROWTH
dc.subject	ECONOMIC IMPACTS
dc.subject	ECONOMIC PERSPECTIVE
dc.subject	ECONOMIC WELFARE
dc.subject	EXPENDITURE
dc.subject	EXPENDITURES
dc.subject	EXTERNAL CREDIT
dc.subject	EXTERNAL DEBT
dc.subject	EXTERNAL FINANCE
dc.subject	EXTREME DROUGHT
dc.subject	EXTREME EVENT
dc.subject	EXTREME EVENTS
dc.subject	EXTREME VALUE STATISTICS
dc.subject	EXTREME VALUE THEORY
dc.subject	EXTREME WEATHER
dc.subject	EXTREME WEATHER EVENTS
dc.subject	FAMINE
dc.subject	FARMERS
dc.subject	FINANCIAL ASSISTANCE
dc.subject	FINANCIAL CAPACITY
dc.subject	FINANCIAL EXPOSURE
dc.subject	FINANCIAL FLOWS
dc.subject	FINANCIAL INSTRUMENTS
dc.subject	FINANCIAL MARKETS
dc.subject	FINANCIAL NEEDS
dc.subject	FINANCIAL RESILIENCE
dc.subject	FINANCIAL RESOURCES
dc.subject	FINANCIAL RISKS
dc.subject	FINANCING SOURCES
dc.subject	FISCAL POLICY
dc.subject	FLOOD
dc.subject	FLOODING
dc.subject	FLOODS
dc.subject	FOREIGN CURRENCY
dc.subject	FOREIGN EXCHANGE
dc.subject	FOREIGN EXCHANGE RESERVES
dc.subject	GLOBAL CAPITAL
dc.subject	GLOBAL CAPITAL MARKETS
dc.subject	GOVERNMENT BONDS
dc.subject	GOVERNMENT BORROWING
dc.subject	GOVERNMENT BUDGET
dc.subject	GOVERNMENT EXPENDITURES
dc.subject	GOVERNMENT FINANCES
dc.subject	GOVERNMENT LIABILITIES
dc.subject	GOVERNMENT LIABILITY
dc.subject	GOVERNMENT REVENUES
dc.subject	GOVERNMENT SPENDING
dc.subject	GROSS NATIONAL INCOME
dc.subject	HEALTH CARE
dc.subject	HURRICANE
dc.subject	HURRICANES
dc.subject	IMPORTS
dc.subject	INCOME DISTRIBUTION
dc.subject	INCOME GROUPS
dc.subject	INCOME HOUSEHOLDS
dc.subject	INCREMENTAL COSTS
dc.subject	INDEBTEDNESS
dc.subject	INFLATION
dc.subject	INSTRUMENT
dc.subject	INSURANCE
dc.subject	INSURANCE ACTIVITIES
dc.subject	INSURANCE CONTRACT
dc.subject	INSURANCE COVER
dc.subject	INSURANCE FUNDS
dc.subject	INSURANCE INSTRUMENTS
dc.subject	INSURANCE POOLS
dc.subject	INSURANCE PREMIUMS
dc.subject	INSURANCE SYSTEM
dc.subject	INSURANCE SYSTEMS
dc.subject	INTEREST RATE
dc.subject	INTERNATIONAL BANK
dc.subject	INTERNATIONAL BONDS
dc.subject	INTERNATIONAL BORROWING
dc.subject	INTERNATIONAL FINANCIAL INSTITUTIONS
dc.subject	INTERNATIONAL FINANCIAL MARKETS
dc.subject	INTERNATIONAL LENDING
dc.subject	INTERNATIONAL MARKET
dc.subject	INTERNATIONAL MARKETS
dc.subject	INTERNATIONAL RESERVES
dc.subject	INVENTORY
dc.subject	INVESTING
dc.subject	INVESTMENT DECISIONS
dc.subject	INVESTMENT PROJECTS
dc.subject	LIQUIDITY
dc.subject	LOAN
dc.subject	LOCAL CURRENCY
dc.subject	LOSS FUNCTION
dc.subject	MACROECONOMIC POLICY
dc.subject	MACROECONOMIC RISK
dc.subject	MACROECONOMIC STABILITY
dc.subject	MARGINAL COST
dc.subject	MARKET FAILURE
dc.subject	MONEY SUPPLY
dc.subject	NATURAL DISASTER
dc.subject	NATURAL DISASTERS
dc.subject	NATURAL HAZARD
dc.subject	NATURAL HAZARDS
dc.subject	NEGOTIATIONS
dc.subject	NET LOSS
dc.subject	OPPORTUNITY COSTS
dc.subject	OUTSIDE ASSISTANCE
dc.subject	PENSION
dc.subject	PORTFOLIOS
dc.subject	PREMIUM PAYMENT
dc.subject	PRESENT VALUE
dc.subject	PROBABILITY OF OCCURRENCE
dc.subject	PRODUCTIVITY
dc.subject	PROGRAMS
dc.subject	PUBLIC FINANCE
dc.subject	PUBLIC INVESTMENT
dc.subject	REINSURANCE
dc.subject	REINSURER
dc.subject	RELIEF
dc.subject	RESERVE
dc.subject	RESERVE FUND
dc.subject	RESERVE FUNDS
dc.subject	RESERVES
dc.subject	RETURN
dc.subject	RETURNS
dc.subject	RISK ASSESSMENT
dc.subject	RISK ASSESSMENTS
dc.subject	RISK AVERSION
dc.subject	RISK INSURANCE
dc.subject	RISK MANAGEMENT
dc.subject	RISK MANAGEMENT SYSTEMS
dc.subject	RISK NEUTRAL
dc.subject	RISK PREMIUM
dc.subject	RISK REDUCTION
dc.subject	RISK SHARING
dc.subject	RISK TRANSFER
dc.subject	SAFETY
dc.subject	SAFETY NETS
dc.subject	SAVINGS
dc.subject	SCENARIOS
dc.subject	SMALL BUSINESSES
dc.subject	SOVEREIGN RISK
dc.subject	STATE GUARANTEES
dc.subject	STOCK DATA
dc.subject	STOCKS
dc.subject	STORM
dc.subject	SUSTAINABILITY
dc.subject	TAX
dc.subject	TAXATION
dc.subject	TECHNICAL ASSISTANCE
dc.subject	TRADE BALANCES
dc.subject	TRANSACTION
dc.subject	TRANSACTION COSTS
dc.subject	TROPICAL CYCLONES
dc.subject	UNCERTAINTIES
dc.subject	WEATHER DERIVATIVE
dc.subject	WEATHER EXTREMES
dc.subject	WIND SPEED
dc.title	Assessing the Financial Vulnerability to Climate-Related Natural Hazards
dc.type	Publications & Research :: Policy Research Working Paper
dc.coverage	The World Region
dc.coverage	The World Region