IPCC_Managing Risks of Extreme Events.pdf - Climate Access

National Systems for Managing the Risks from Climate Extremes and DisastersChapter 6Box 6-3 | Mexico’s Fund for Natural Disasters, FONDENMexico is exposed to natural hazards due to its location within one of the world’s most active seismic regions and in the path ofhurricanes and tropical storms originating in the Caribbean Sea and Atlantic and Pacific Oceans. There have been many disaster eventsand in the past severe hurricane disasters (in addition to earthquakes) have created large fiscal liabilities and imbalances (Cardenas etal., 2007). Given high perceived financial vulnerability to disasters, in 1994, the Mexican Government passed a law that required federal,state, and municipal public assets to be insured. This was intended to relieve the central government of the obligation of having to payfor the reconstruction of public infrastructure, although the adequate level of insurance, particularly for very large events remained aconcern. As a next step, in 1996, the national government established a system of allocating resources for disaster spending (FONDEN)in order to enhance the country’s financial preparedness for disaster losses and prevent imbalances in the federal government financesderived from outlays caused by catastrophes. FONDEN serves as last-resort funding for uninsurable losses, such as emergency responseand disaster relief expenditures. In addition to this budgetary program, in 1999, a reserve fund was created that accumulates the surplusof the previous year’s FONDEN budget item (Cardenas et al., 2007).After the initial phase that was characterized by spending in line with requirements caused by disaster events, one concern for thedisaster management authorities became the regular demands on the funds in non-disaster years. As a consequence, budgeted FONDENresources were declining while demands on FONDEN’s resources were becoming more volatile, and outlays often exceeded budgetedfunds causing the reserve fund to decline. In 2005, after the severe hurricane season affecting large parts of coastal Mexico, the fundwas finally exhausted. This forced the Mexican Government to look at alternative risk financing strategies, which included hedgingagainst disaster shocks, government agencies at all levels providing their insurance protection independent of FONDEN, and thatFONDEN itself should only indemnify losses that exceed the financial capacity of the federal, local, or municipal government agencies. In2006, Mexico became the first transition country to transfer part of its public sector catastrophe risk to the international reinsurance andcapital markets, and, in 2009, the transaction was renewed for another three years, covering both hurricane and earthquake risk(Cardenas et al., 2007).in line with the described ‘no’ and ‘low regrets’ strategies discussed inSection 6.3.1.6.5. Practices including Methods and ToolsWith some success and with many challenges, countries are increasinglyadopting a diverse range of approaches, methods, and tools to managedisaster risk and adapt to a changing climate, with the intention ofbuilding a safe, secure society. This section discusses efforts made inbuilding a culture of safety (Section 6.5.1), which includes methodsassociated with assessing and communicating risk; reducing climaterelateddisaster risks (Section 6.5.2); transferring and sharing residualrisks (Section 6.5.3); and managing the impacts of disasters holistically(Section 6.5.4), as disaster risks can never be reduced to zero.Accordingly, it is important to recognize that the approaches, methods,and tools discussed here are complementary, often overlapping, andcan be pursued simultaneously. Whereas the Summary for Policymakersincludes a visual representation of the range of such approaches (seeFigure SPM-2), Figure 6-3 on the previous page is tailored to incrementalaction at the national level.Figure 6-3 characterizes the range of risk management and adaptationoptions open to stakeholders involved in national systems for managingdisaster risk. Such options exist along a continuum of action, withchoices between different options being dependent on the qualityof information and how it is communicated, the findings of riskassessments, the culture of risk management/acceptability of risk, andon capacities and resources. In practice, different options will likely bepursued simultaneously and will have a high degree of co-dependence.6.5.1. Building a Culture of SafetyBuilding a culture of safety involves several strategies and activities thatstart with the assessment of risk factors and development of informationsystems that provide relevant information for critical decisionmaking. Italso involves understanding the large variety of beliefs and core valuesystems, which will help determine decisions made by different actorsand stakeholders. A key ingredient is appropriate public education andawareness raising, and as such, early warning systems play an importantrole in managing residual risk as they can provide timely warnings toexposed communities and thus can promote action for a quickresponse. Time series empirical data used to generate risk assessments,including those contributing to early warnings, are also critical for longtermplanning because of their relevance in generating appropriateinformation about adequate land use planning, for example, to reduceclimatic risks. As examples, in the same sense, analyzed informationabout climate-adapted infrastructure, enhanced human development,ecosystems protection, risks transfer, and sharing and managing theimpacts of climate-related disasters can play a fundamental role inbuilding a culture and practice of human safety.362