GAR 2015 Main Report

Note: MFIs = multilateral financial institutions.

104

Part I - Chapter 5

In addition to ex-ante financing mechanisms, investments in disaster risk reduction measures are expected to significantly reduce the expected negative impact of disasters on economic growth (UNISDR, 2013a

UNISDR. 2013a,Global Assessment Report on Disaster Risk Reduction: From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction, Geneva, Switzerland: UNISDR.. .

). Previous analysis has shown, for example, that a 1-in-100-year event in Honduras could produce direct losses of up to 33 per cent and additional indirect and cumulative losses of up to 24 per cent of GDP. New simulations of real GDP growth after historical disaster impacts in Honduras—with and without previous disaster risk reduction investments—show that these losses could be significantly reduced by investing in risk reduction.4 Interestingly, the simulations also show that in a country such as Honduras, where high-intensity disasters occur relatively frequently, even larger investments targeted at reducing the risk of large-scale events make financial and economic sense.

In countries with very low rates of capital investment, recovery may take years if disasters destroy a significant proportion of their capital stock. Countries with small and vulnerable economies

have particularly low resilience, as their entire economy may be devastated; if they also have limited fiscal manoeuvrability, they may also have difficulties financing a recovery (UNISDR, 2009a

UNISDR. 2009a,Global Assessment Report on Disaster Risk Reduction: Risk and Poverty in a Changing Climate, Geneva, Switzerland: UNISDR.. .

The cumulative effect of disaster loss on fixed capital may be dramatic in SIDS such as Vanuatu (Figure 5.5) or small countries like Belize.5 It is estimated that Belize has lost almost 18 per cent of its accumulated capital investment since 1970 due to the cumulative effects of disasters over the past 20 years. For Vanuatu, this amounts to a full 24 per cent of capital investment since 1970. However, even in higher-income small island states, economic losses can also have a highly disruptive effect on economic development. For example, the Cayman Islands suffered significant losses from Hurricane Ivan in 2004 and its economy still has not recovered fully, leading to a reduction of cumulative capital investment by almost 23 per cent since 1970.

In contrast, large economies such as China or Mexico seem to have sufficient capacity to absorb

(Source: Mochizuki et al., 2014

Mochizuki, Junko, Stefan Hochrainer, Keith Wil-liges and Reinhard Mechler. 2014,Fiscal and Economic Risk of Natural Disasters in Comoros, Mauritius, Seychelles and Zanzibar, CATSIM Assessment (Preliminary Result). Risk Policy and Vulnerability Program, International Institute for Applied Systems Analysis (IIASA).. .

Figure 5.4 Financing gap for cyclone wind and earthquake risk in Mauritius

	Note: MFIs = multilateral financial institutions. 104 Part I - Chapter 5 In addition to ex-ante financing mechanisms, investments in disaster risk reduction measures are expected to significantly reduce the expected negative impact of disasters on economic growth (UNISDR, 2013a x UNISDR. 2013a,Global Assessment Report on Disaster Risk Reduction: From Shared Risk to Shared Value: the Business Case for Disaster Risk Reduction, Geneva, Switzerland: UNISDR.. . ). Previous analysis has shown, for example, that a 1-in-100-year event in Honduras could produce direct losses of up to 33 per cent and additional indirect and cumulative losses of up to 24 per cent of GDP. New simulations of real GDP growth after historical disaster impacts in Honduras—with and without previous disaster risk reduction investments—show that these losses could be significantly reduced by investing in risk reduction.4 Interestingly, the simulations also show that in a country such as Honduras, where high-intensity disasters occur relatively frequently, even larger investments targeted at reducing the risk of large-scale events make financial and economic sense. In countries with very low rates of capital investment, recovery may take years if disasters destroy a significant proportion of their capital stock. Countries with small and vulnerable economies have particularly low resilience, as their entire economy may be devastated; if they also have limited fiscal manoeuvrability, they may also have difficulties financing a recovery (UNISDR, 2009a x UNISDR. 2009a,Global Assessment Report on Disaster Risk Reduction: Risk and Poverty in a Changing Climate, Geneva, Switzerland: UNISDR.. . ). The cumulative effect of disaster loss on fixed capital may be dramatic in SIDS such as Vanuatu (Figure 5.5) or small countries like Belize.5 It is estimated that Belize has lost almost 18 per cent of its accumulated capital investment since 1970 due to the cumulative effects of disasters over the past 20 years. For Vanuatu, this amounts to a full 24 per cent of capital investment since 1970. However, even in higher-income small island states, economic losses can also have a highly disruptive effect on economic development. For example, the Cayman Islands suffered significant losses from Hurricane Ivan in 2004 and its economy still has not recovered fully, leading to a reduction of cumulative capital investment by almost 23 per cent since 1970. In contrast, large economies such as China or Mexico seem to have sufficient capacity to absorb (Source: Mochizuki et al., 2014 x Mochizuki, Junko, Stefan Hochrainer, Keith Wil-liges and Reinhard Mechler. 2014,Fiscal and Economic Risk of Natural Disasters in Comoros, Mauritius, Seychelles and Zanzibar, CATSIM Assessment (Preliminary Result). Risk Policy and Vulnerability Program, International Institute for Applied Systems Analysis (IIASA).. . .) Figure 5.4 Financing gap for cyclone wind and earthquake risk in Mauritius	Page 1 Page 10 Page 20 Page 30 Page 40 Page 50 Page 60 Page 70 Page 80 Page 90 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 ->Page 106 Page 107 Page 108 Page 109 Page 110 Page 111 Page 112 Page 113 Page 114 Page 115 Page 116 Page 117 Page 118 Page 120 Page 130 Page 140 Page 150 Page 160 Page 170 Page 180 Page 190 Page 200 Page 210 Page 220 Page 230 Page 240 Page 250 Page 260 Page 270 Page 280 Page 290 Page 300 Page 310