Financial Protection of the State Against Natural Disasters: A Primer

26 Pages Posted: 20 Apr 2016

See all articles by Francis Ghesquiere

Francis Ghesquiere

World Bank

Olivier Mahul

World Bank - Financial Sector Development

Date Written: September 1, 2010

Abstract

This paper has been prepared for policy makers interested in establishing or strengthening financial strategies to increase the financial response capacity of governments of developing countries in the aftermath of natural disasters, while protecting their long-term fiscal balances. It analyzes various aspects of emergency financing, including the types of instruments available, their relative costs and disbursement speeds, and how these can be combined to provide cost-effective financing for the different phases that follow a disaster. The paper explains why governments are usually better served by retaining most of their natural disaster risk while using risk transfer mechanisms to manage the excess volatility of their budgets or access immediate liquidity after a disaster. Finally, it discusses innovative approaches to disaster risk financing and provides examples of strategies that developing countries have implemented in recent years.

Keywords: Insurance & Risk Mitigation, Banks & Banking Reform, Debt Markets, Natural Disasters, Hazard Risk Management

Suggested Citation

Ghesquiere, Francis and Mahul, Olivier, Financial Protection of the State Against Natural Disasters: A Primer (September 1, 2010). World Bank Policy Research Working Paper No. 5429, Available at SSRN: https://ssrn.com/abstract=1680722

Francis Ghesquiere

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

Olivier Mahul (Contact Author)

World Bank - Financial Sector Development ( email )

Washington, DC 20433
United States

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