Private Enterprise and Financial Markets > Environment > Disaster Risk Management
Innovative Financial Instruments for Natural Disaster Risk Management
By Torben J. Andersen (12/02, ENV-140, En)
Natural disasters that result in catastrophic losses of human lives and property catch the world?s attention every year. The familiar scenes of death and destruction lead one to wonder how such devastation can ever be remedied. Yet such incidents occur and the rescue, relief and reconstruction efforts are well documented.
However, the public rarely, if ever, will know or understand how the damages from natural catastrophes are recuperated or reconstruction is actually financed. This report explains the various mechanisms and financial instruments used to share the risks associated with covering these losses.
Torben Andersen provides us with an in-depth explanation of how losses due to catastrophes are insured and who absorbs the costs of compensating the insured assets. This is an insider?s primer on insurance, reinsurance and new capital market instruments that make it possible to continue to respond to the im-pacts of recurrent natural disasters.
The Inter-American Development Bank?s Sustainable Development Department is undertaking further studies in the areas of financial planning and risk transfer that will help understand disaster risk transfer instruments that provide financial protection for the private and public sectors in Latin America and the Caribbean. The Bank?s current action plan on natural disaster risk management emphasizes such issues as risk identification, mitigation measures, risk transfer and disaster preparedness. As part of the overall Bank strategy for comprehensive risk management, this document specifically focuses on new financial mechanisms and opportunities for catastrophe risk transfer.
Last updated: 06/12/07
