A global review of disaster reduction initiatives - Welcome to the ...

Selected application of disaster reduction measures55.5.- Financial and economic toolsIn view of the exorbitant economic and social costs of recurring disasters, development assistanceand financial tools and instruments for risk-sharing and risk-transfer are important for theapplication of measures for disaster risk reduction. The increasing involvement of internationaldevelopment banks and agencies in this area supports the strengthening of national and corporatecommitment to engage in risk and vulnerability reduction. Insurance and reinsurance areessential instruments for recovering losses and supporting post-disaster recovery. Insuranceschemes need to be complemented by other low-cost risk sharing mechanisms in poorer communities,such as kinship networks, microfinance and public works programmes to increase copingcapacities. Additional tools and financial incentives are necessary to promote proactive disasterrisk reduction investment. It is also important that all development projects include a criticalconsideration of disaster risks and vulnerability, and the policies and programs meant for reducingdisasters risks are included in poverty reduction programs.The first part of this section shows how some of the international development banks havealready adopted policies and instruments to include risk reduction in their normal lending operations.In the subsequent part, a brief overview of specific financial instruments, such as insurance,microfinance and public works programmes , has been provided.Development banks promotinginvestment in disaster risk reductionThe World Bank and regional developmentbanks have emerged as one of the main sourcesof funding for recovery and reconstruction followinga major disaster. A large number ofgovernments in the developing world findthemselves fiscally constrained to reallocatetheir resources for emergent needs following alarge-scale disaster and turn to these financialinstitutions for immediate assistance. All thesebanks have therefore developed a sizeable portfolioof post-disaster recovery and reconstructionprograms over a number of years. TheWorld Bank has provided US$14 billion in thelast two decades for post-disaster recovery andreconstruction. These institutions throughtheir large-scale lending are also in a strongersituation to support sustainable disaster riskreduction strategies. In the last few years, thesefinancial institutions have come to recognizethe strategic importance of these projects forimplementing disaster preparedness, mitigationand emergency response programs.Latin America and the CaribbeanWhile work related to the economic and financialaspects of disaster reduction is proceedingat different paces reflecting different levels ofinterest throughout the world, Latin Americanand Caribbean countries have taken the lead.Disaster vulnerability and economic developmenthave been encouraged by influentialregional institutions such as the UN EconomicCommission for Latin America and the Caribbean(ECLAC), the Central American Bank for EconomicIntegration (CABEI), the CaribbeanDevelopment Bank (CDB), the Andean DevelopmentCorporation (CAF) and the Inter-AmericanDevelopment Bank (IADB) as well as by theWorld Bank’s Disaster Management Facility(DMF). These organizations have recognisedthe value of disaster reduction measures inreducing and alleviating serious economic disruptionsand thus in determining a country’spath towards economic growth.IADB is a very active lending institution in thefield of disaster reduction with well-definedpolicies and activities, while other regional andinternational banks are still less focused in thisarea. IADB strategies to incorporate disasterreduction in development are outlined in Facingthe Challenge of Natural Disasters in Latin Americaand the Caribbean: An IADB Action Plan(March 2000).253