Assessing the Financial Vulnerability to Climate-Related Natural Hazards

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dc.creatorMechler, Reinhard
dc.creatorHochrainer, Stefan
dc.creatorPflug, Georg
dc.creatorLotsch, Alexander
dc.creatorWilliges, Keith
dc.date2012-03-19T18:38:33Z
dc.date2012-03-19T18:38:33Z
dc.date2010-03-01
dc.date.accessioned2026-07-01T01:16:28Z
dc.descriptionNational governments are key actors in managing the impacts of extreme weather events, yet many highly exposed developing countries -- faced with exhausted tax bases, high levels of indebtedness, and limited donor assistance -- have been unable to raise sufficient and timely capital to replace or repair damaged infrastructure and restore livelihoods after major disasters. Such financial vulnerability hampers development and exacerbates poverty. Based on the record of the past 30 years, this paper finds many developing countries, in particular small island states, to be highly financially vulnerable, and experiencing a resource gap (net disaster losses exceed all available financing sources) for events that occur with a probability of 2 percent or higher. This has three main implications. First, efforts to reduce risk need to be ramped-up to lessen the serious human and financial burdens. Second, contrary to the well-known Arrow-Lind theorem, there is a case for country risk aversion implying that disaster risks faced by some governments cannot be absorbed without major difficulty. Risk aversion entails the ex ante financing of losses and relief expenditure through calamity funds, regional insurance pools, or contingent credit arrangements. Third, financially vulnerable (and generally poor) countries are unlikely to be able to implement pre-disaster risk financing instruments themselves, and thus require technical and financial assistance from the donor community. The cost estimates of financial vulnerability -- based on today's climate -- inform the design of "climate insurance funds" to absorb high levels of sovereign risk and are found to be in the lower billions of dollars annually, which represents a baseline for the incremental costs arising from future climate change.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100303092429
dc.identifierhttps://hdl.handle.net/10986/3718
dc.identifier10.1596/1813-9450-5232
dc.identifier.urihttp://hdl.handle.net/123456789/416622
dc.languageEnglish
dc.relationPolicy Research working paper ; no. WPS 5232
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo/
dc.rightsWorld Bank
dc.subjectAGENTS
dc.subjectAGRICULTURAL INSURANCE
dc.subjectALLOCATION
dc.subjectBANK CREDIT
dc.subjectBASIS POINTS
dc.subjectBUDGET CONSTRAINT
dc.subjectBUDGET DEFICIT
dc.subjectCAPITAL MOVEMENTS
dc.subjectCAPITAL STOCK
dc.subjectCATASTROPHE BOND
dc.subjectCATASTROPHE BONDS
dc.subjectCATASTROPHE INSURANCE
dc.subjectCATASTROPHE REINSURANCE
dc.subjectCATASTROPHES
dc.subjectCATASTROPHIC EVENT
dc.subjectCATASTROPHIC EVENTS
dc.subjectCATASTROPHIC LOSS
dc.subjectCATASTROPHIC RISKS
dc.subjectCENTRAL BANK
dc.subjectCENTRE FOR RESEARCH ON THE EPIDEMIOLOGY
dc.subjectCLEAN ENVIRONMENT
dc.subjectCLIMATE
dc.subjectCLIMATE CHANGE
dc.subjectCLIMATE EXTREMES
dc.subjectCLIMATE INSURANCE
dc.subjectCLIMATE INSURANCE INITIATIVE
dc.subjectCLIMATE VARIABILITY
dc.subjectCOMMERCIAL BANKS
dc.subjectCONTINGENT DEBT
dc.subjectCOST ESTIMATES
dc.subjectCOSTS OF INSURANCE
dc.subjectCOUNTRY DEBT
dc.subjectCOUNTRY RISK
dc.subjectCRED
dc.subjectCREDIT ARRANGEMENTS
dc.subjectCREDIT MARKETS
dc.subjectCREDIT POLICY
dc.subjectCURRENCY UNITS
dc.subjectDAMAGES
dc.subjectDEBT
dc.subjectDEBT ISSUES
dc.subjectDEFICIT FINANCING
dc.subjectDEVASTATION
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPING COUNTRY
dc.subjectDEVELOPMENT BANK
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDISASTER
dc.subjectDISASTER AID
dc.subjectDISASTER EVENT
dc.subjectDISASTER EVENTS
dc.subjectDISASTER INSURANCE
dc.subjectDISASTER PRONE COUNTRIES
dc.subjectDISASTER RELIEF
dc.subjectDISASTER RISK
dc.subjectDISASTER RISK FINANCING
dc.subjectDISASTER RISKS
dc.subjectDISASTERS
dc.subjectDISTRIBUTION OF INCOME
dc.subjectDIVERSIFIED PORTFOLIO
dc.subjectDOMESTIC BOND
dc.subjectDOMESTIC BONDS
dc.subjectDOMESTIC CREDIT
dc.subjectDOMESTIC FINANCIAL MARKETS
dc.subjectDOMESTIC GOVERNMENT BONDS
dc.subjectDONOR COMMUNITY
dc.subjectDROUGHT
dc.subjectEARTHQUAKE
dc.subjectEARTHQUAKES
dc.subjectECONOMIC ACTIVITY
dc.subjectECONOMIC DEVELOPMENT
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC IMPACTS
dc.subjectECONOMIC PERSPECTIVE
dc.subjectECONOMIC WELFARE
dc.subjectEXPENDITURE
dc.subjectEXPENDITURES
dc.subjectEXTERNAL CREDIT
dc.subjectEXTERNAL DEBT
dc.subjectEXTERNAL FINANCE
dc.subjectEXTREME DROUGHT
dc.subjectEXTREME EVENT
dc.subjectEXTREME EVENTS
dc.subjectEXTREME VALUE STATISTICS
dc.subjectEXTREME VALUE THEORY
dc.subjectEXTREME WEATHER
dc.subjectEXTREME WEATHER EVENTS
dc.subjectFAMINE
dc.subjectFARMERS
dc.subjectFINANCIAL ASSISTANCE
dc.subjectFINANCIAL CAPACITY
dc.subjectFINANCIAL EXPOSURE
dc.subjectFINANCIAL FLOWS
dc.subjectFINANCIAL INSTRUMENTS
dc.subjectFINANCIAL MARKETS
dc.subjectFINANCIAL NEEDS
dc.subjectFINANCIAL RESILIENCE
dc.subjectFINANCIAL RESOURCES
dc.subjectFINANCIAL RISKS
dc.subjectFINANCING SOURCES
dc.subjectFISCAL POLICY
dc.subjectFLOOD
dc.subjectFLOODING
dc.subjectFLOODS
dc.subjectFOREIGN CURRENCY
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE RESERVES
dc.subjectGLOBAL CAPITAL
dc.subjectGLOBAL CAPITAL MARKETS
dc.subjectGOVERNMENT BONDS
dc.subjectGOVERNMENT BORROWING
dc.subjectGOVERNMENT BUDGET
dc.subjectGOVERNMENT EXPENDITURES
dc.subjectGOVERNMENT FINANCES
dc.subjectGOVERNMENT LIABILITIES
dc.subjectGOVERNMENT LIABILITY
dc.subjectGOVERNMENT REVENUES
dc.subjectGOVERNMENT SPENDING
dc.subjectGROSS NATIONAL INCOME
dc.subjectHEALTH CARE
dc.subjectHURRICANE
dc.subjectHURRICANES
dc.subjectIMPORTS
dc.subjectINCOME DISTRIBUTION
dc.subjectINCOME GROUPS
dc.subjectINCOME HOUSEHOLDS
dc.subjectINCREMENTAL COSTS
dc.subjectINDEBTEDNESS
dc.subjectINFLATION
dc.subjectINSTRUMENT
dc.subjectINSURANCE
dc.subjectINSURANCE ACTIVITIES
dc.subjectINSURANCE CONTRACT
dc.subjectINSURANCE COVER
dc.subjectINSURANCE FUNDS
dc.subjectINSURANCE INSTRUMENTS
dc.subjectINSURANCE POOLS
dc.subjectINSURANCE PREMIUMS
dc.subjectINSURANCE SYSTEM
dc.subjectINSURANCE SYSTEMS
dc.subjectINTEREST RATE
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL BONDS
dc.subjectINTERNATIONAL BORROWING
dc.subjectINTERNATIONAL FINANCIAL INSTITUTIONS
dc.subjectINTERNATIONAL FINANCIAL MARKETS
dc.subjectINTERNATIONAL LENDING
dc.subjectINTERNATIONAL MARKET
dc.subjectINTERNATIONAL MARKETS
dc.subjectINTERNATIONAL RESERVES
dc.subjectINVENTORY
dc.subjectINVESTING
dc.subjectINVESTMENT DECISIONS
dc.subjectINVESTMENT PROJECTS
dc.subjectLIQUIDITY
dc.subjectLOAN
dc.subjectLOCAL CURRENCY
dc.subjectLOSS FUNCTION
dc.subjectMACROECONOMIC POLICY
dc.subjectMACROECONOMIC RISK
dc.subjectMACROECONOMIC STABILITY
dc.subjectMARGINAL COST
dc.subjectMARKET FAILURE
dc.subjectMONEY SUPPLY
dc.subjectNATURAL DISASTER
dc.subjectNATURAL DISASTERS
dc.subjectNATURAL HAZARD
dc.subjectNATURAL HAZARDS
dc.subjectNEGOTIATIONS
dc.subjectNET LOSS
dc.subjectOPPORTUNITY COSTS
dc.subjectOUTSIDE ASSISTANCE
dc.subjectPENSION
dc.subjectPORTFOLIOS
dc.subjectPREMIUM PAYMENT
dc.subjectPRESENT VALUE
dc.subjectPROBABILITY OF OCCURRENCE
dc.subjectPRODUCTIVITY
dc.subjectPROGRAMS
dc.subjectPUBLIC FINANCE
dc.subjectPUBLIC INVESTMENT
dc.subjectREINSURANCE
dc.subjectREINSURER
dc.subjectRELIEF
dc.subjectRESERVE
dc.subjectRESERVE FUND
dc.subjectRESERVE FUNDS
dc.subjectRESERVES
dc.subjectRETURN
dc.subjectRETURNS
dc.subjectRISK ASSESSMENT
dc.subjectRISK ASSESSMENTS
dc.subjectRISK AVERSION
dc.subjectRISK INSURANCE
dc.subjectRISK MANAGEMENT
dc.subjectRISK MANAGEMENT SYSTEMS
dc.subjectRISK NEUTRAL
dc.subjectRISK PREMIUM
dc.subjectRISK REDUCTION
dc.subjectRISK SHARING
dc.subjectRISK TRANSFER
dc.subjectSAFETY
dc.subjectSAFETY NETS
dc.subjectSAVINGS
dc.subjectSCENARIOS
dc.subjectSMALL BUSINESSES
dc.subjectSOVEREIGN RISK
dc.subjectSTATE GUARANTEES
dc.subjectSTOCK DATA
dc.subjectSTOCKS
dc.subjectSTORM
dc.subjectSUSTAINABILITY
dc.subjectTAX
dc.subjectTAXATION
dc.subjectTECHNICAL ASSISTANCE
dc.subjectTRADE BALANCES
dc.subjectTRANSACTION
dc.subjectTRANSACTION COSTS
dc.subjectTROPICAL CYCLONES
dc.subjectUNCERTAINTIES
dc.subjectWEATHER DERIVATIVE
dc.subjectWEATHER EXTREMES
dc.subjectWIND SPEED
dc.titleAssessing the Financial Vulnerability to Climate-Related Natural Hazards

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