Natural Disasters

Natural Disasters have had significant impacts on the economic and social development of Latin America and the Caribbean. Since 1975, disasters in the Region have on average affected 4.7 million people annually, causing some 5,300 deaths and US$3.3 billion in physical losses per year.

Moreover, while it is not possible to predict precisely what the climate will be like in the future, there is growing consensus that the consequences of unabated climate change are likely to be very serious. Climate change has the potential to significantly shift global weather patterns, thereby strongly affecting the number and severity of natural catastrophes, and the global economic development.

Confronted with the high exposure to adverse natural events in the region, the IDB has developed an Integrated Disaster Risk Management Approach to support the countries. It comprises the following four components:

• National risk evaluation
• Prevention and mitigation measures
• Strengthening of national and local institutions
• Risk-retention and risk-transfer financing mechanisms

The program’s approach helps nations develop a panoramic view on their disaster exposure by focusing on country specific financial strategies to improve the planning and management of natural disasters.

To make the program a reality, the IDB is offering new financial instruments to those countries that commit to advance the development of all four components, thereby creating a powerful incentive to reduce the natural disaster risks through prevention.

Once a country demonstrates a commitment to prevention, the financial strategy provides a range of financial instruments to cover the post-emergency funding shortfall. These instruments include:

• Investment loans
• Contingent credit lines
• Risk transfer financing

It is the customized combination of these instruments that allows the program to effectively mitigate, manage and transfer the natural catastrophe risk that currently impacts the countries.