Disaster risk financing as part of a comprehensive disaster risk management framework can be an effective tool in mitigating the effects of natural disasters.
Disaster Financing and Insurance (GFDRR)
Disaster Risk Management
Financing for Climate Change
In the News
Jan. 23, 2014: Tonga to Receive US $1.27 Million Payout for Cyclone Response
Dec. 18, 2013: Uruguay uses weather derivative to protect itself from drought and oil price volatility [Read press release]
Sept. 19, 2013: Mexico is among the countries better prepared to deal with natural disasters (article published in CNNEXPANSION)
Jan. 17, 2013: New pilot catastrophe risk insurance program will provide Marshall Islands, Tonga, Solomon Islands, Samoa and Vanuatu with immediate funding if a major natural disaster occurs (Case study)
Nov. 20, 2012: An efficient strategy to prevent and manage disaster risks in Mexico (Feature story)
Nov. 4, 2012: Is Mexico ready for its next big storm or earthquake? (blog)
Oct. 12, 2012: Mexico Launches Second Catastrophe Bond to Provide Coverage Against Earthquakes and Hurricanes
Oct. 10, 2012: Sendai Dialogue Advances Global Consensus on Disaster Risk (Press release)
Oct. 5, 2012: World Bank Can Now Help Clients Manage Financial Risks Related to Geological and Meteorological Events
Jun. 20, 2012: G20 Urges Action to Counter Rising Costs from Natural Disasters (Press release)
Apr. 17, 2012:
So-called natural disasters
are not unpredictable (Blog)
Jan. 2012: Making the Philippines More Resilient to
Natural Disasters (Feature story)
Dec. 29, 2011: Philippines Calls on US$500 million Cat DDO to respond to tropical storm 'Sendong'
Nov. 8, 2011: El Salvador Uses US$50 Million Cat DDO for Flood Emergency (Press release)
Sept. 28, 2011: Philippines signs US$500 Million Cat DDO
Sept. 26, 2011: "One A-Maize-ing Use of Derivatives" [derivatiViews]
Dec. 28, 2010: Colombia Disburses US$150 Million Cat DDO
IBRD offers a line of disaster risk financing for direct budget support that provides varying levels of protection depending on the type, frequency, and severity of the event.
Financial contracts based on an underlying weather index that transfer the risk to the financial markets. Payments are triggered by adverse weather events according to pre-specified conditions (e.g. levels of rainfall, seasonal temperatures, etc.). IBRD offers intermediation services for index-based weather derivatives to both middle- and low-income countries.
The Catastrophe Deferred Drawdown Option or Cat DDO provides countries with immediate access to financing following a natural disaster and the declaration of a state of emergency. Countries must have a disaster risk management framework in place.
Transfer the risk of a natural disaster to investors by allowing the issuer to not repay the bond principal if a major natural disaster occurs. IBRD has developed the MultiCat Program - a bond issuance platform - that transfers diversified risk to private investors.