GAR 2015 Main Report

195

that acted as milestones for the development of new approaches (Figure 9.8).

Since 2005, these innovations have pushed the boundaries of existing insurance schemes and enabled access to financial instruments of different kinds, including parametric catastrophe bonds, weather derivatives, disaster-specific contingent credit, and regional risk pooling, even for low-income countries (UNISDR, 2011a

UNISDR. 2011a,Global Assessment Report on Disaster Risk Reduction: Revealing Risk, Redefining Development, Geneva, Switzerland: UNISDR.. .

; 2013a;

GFDRR, 2014b

GFDRR (Global Facility for Disaster Reduction and Recovery). 2014b,Financial Protection Against Natural Disasters, Background Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR..
Click here to view this GAR paper.

). The new schemes include microinsurance products that are often provided by civil society organizations and cater to lowincome communities and smallholders, traders and small businesses, as well as regional schemes such as the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI; GAR 13 paper

GFDRR, 2014b

A number of countries have carried out institutional reforms to support the integration of disaster risk financing into a broader, strategic approach to disaster risk management (Ghesquiere and Mahul, 2010

Ghesquiere, Francis and Olivier Mahul. 2010,Fi-nancial Protection of the State against Natural Disasters, A Primer. Policy Research Working Paper 5429. September 2010. The World Bank, Washington, D.C.. .

; World Bank, 2013

World Bank. 2013,Building Resilience: Integrating Climate and Disaster Risk into Development, The World Bank Group Experience. The World Bank, Washington, D.C.. .

;

GFDRR, 2014b

). Ministries of finance are increasingly taking the lead in the development of national and regional insurance and credit schemes, and governments are developing new institutional arrangements such as national risk boards that include insurance supervisors, disaster management agencies and the relevant line ministries (ibid.). National risk boards such as the one already implemented in Singapore are now being considered as a new potential arrangement for disaster risk governance in Jamaica, Morocco and Rwanda (ibid.).

However, challenges remain. Globally, the supply of insurance is increasingly well capitalized, while only a small proportion of households in low and middle-income countries have catastrophe insurance (Lloyd’s, 2012

Lloyd’s. 2012,Lloyd’s Global Underinsurance Report, October 2012.. .

). Detailed risk models are still not available for many of these countries, meaning that risk may not be properly priced, while

competition may tend to drive premiums down to unsustainable levels. In parallel, risks in some locations and industries are increasing to levels that become uninsurable (The Geneva Association, 2013

The Geneva Association. 2013,Warming of the Oceans and Implications for the (Re)insurance Industry, A Geneva Association Report. The Geneva Association (The International Association for the Study of Insurance Economics).. .

). The question of who pays and who benefits becomes even more pronounced under such circumstances, as governments become the de facto insurers of last resort and their implicit liabilities mean that the risks generated become a public burden (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.. .

9.5 Inequality: the future

If inequality continues to rise, it may become a destabilizing global force that manifests not only in increasing disaster risk but also in decreasing capacities to manage those risks.

If inequality is a driver of increasing disaster risk, future projections give no reason to be optimistic. Instead, inequality may well continue to increase in social, economic and territorial terms. As financial capital flows into competitive sectors and locations that provide opportunities for short-term gain, less competitive sectors and locations are left behind. As in the board game Monopoly, where there are winners, by definition there are also losers. Any progress in addressing vulnerability and social resilience, including progress through risk financing, may be ineffective if inequality continues to grow.

Socially, the divide between those who have access to financial capital and those who depend on wage labour for their needs continues to grow. All over the world, wealth has become increasingly concentrated since 1990 (Davies et al., 2012

Davies, James, Rodrigo Lluberas and Anthony F. Shorrocks. 2012,Measuring the Global Distribution of Wealth, 2012 OECD World Forum New Delhi. 17 October 2012.. .

; Piketty, 2014

Piketty, Thomas. 2014,Capital in the Twenty-First Century, First Edition edition. Belknap Press.. .

; Credit Suisse, 2013

Credit Suisse. 2013,Global Wealth Report 2013, October 2013. Zurich: Credit Suisse Research Institute.. .

). Wealth is distributed very differently within regions, though most exhibit high levels of inequality (Figure 9.9).

Increasing income inequality is closely linked to the race for competitiveness, in which businesses

	195 that acted as milestones for the development of new approaches (Figure 9.8). Since 2005, these innovations have pushed the boundaries of existing insurance schemes and enabled access to financial instruments of different kinds, including parametric catastrophe bonds, weather derivatives, disaster-specific contingent credit, and regional risk pooling, even for low-income countries (UNISDR, 2011a x UNISDR. 2011a,Global Assessment Report on Disaster Risk Reduction: Revealing Risk, Redefining Development, Geneva, Switzerland: UNISDR.. . ; 2013a; GFDRR, 2014b x GFDRR (Global Facility for Disaster Reduction and Recovery). 2014b,Financial Protection Against Natural Disasters, Background Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR.. Click here to view this GAR paper. ). The new schemes include microinsurance products that are often provided by civil society organizations and cater to lowincome communities and smallholders, traders and small businesses, as well as regional schemes such as the Caribbean Catastrophe Risk Insurance Facility (CCRIF) and the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI; GFDRR, 2014b x GFDRR (Global Facility for Disaster Reduction and Recovery). 2014b,Financial Protection Against Natural Disasters, Background Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR.. Click here to view this GAR paper. ). A number of countries have carried out institutional reforms to support the integration of disaster risk financing into a broader, strategic approach to disaster risk management (Ghesquiere and Mahul, 2010 x Ghesquiere, Francis and Olivier Mahul. 2010,Fi-nancial Protection of the State against Natural Disasters, A Primer. Policy Research Working Paper 5429. September 2010. The World Bank, Washington, D.C.. . ; World Bank, 2013 x World Bank. 2013,Building Resilience: Integrating Climate and Disaster Risk into Development, The World Bank Group Experience. The World Bank, Washington, D.C.. . ; GFDRR, 2014b x GFDRR (Global Facility for Disaster Reduction and Recovery). 2014b,Financial Protection Against Natural Disasters, Background Paper prepared for the 2015 Global Assessment Report on Disaster Risk Reduction. Geneva, Switzerland: UNISDR.. Click here to view this GAR paper. ). Ministries of finance are increasingly taking the lead in the development of national and regional insurance and credit schemes, and governments are developing new institutional arrangements such as national risk boards that include insurance supervisors, disaster management agencies and the relevant line ministries (ibid.). National risk boards such as the one already implemented in Singapore are now being considered as a new potential arrangement for disaster risk governance in Jamaica, Morocco and Rwanda (ibid.). However, challenges remain. Globally, the supply of insurance is increasingly well capitalized, while only a small proportion of households in low and middle-income countries have catastrophe insurance (Lloyd’s, 2012 x Lloyd’s. 2012,Lloyd’s Global Underinsurance Report, October 2012.. . ). Detailed risk models are still not available for many of these countries, meaning that risk may not be properly priced, while competition may tend to drive premiums down to unsustainable levels. In parallel, risks in some locations and industries are increasing to levels that become uninsurable (The Geneva Association, 2013 x The Geneva Association. 2013,Warming of the Oceans and Implications for the (Re)insurance Industry, A Geneva Association Report. The Geneva Association (The International Association for the Study of Insurance Economics).. . ). The question of who pays and who benefits becomes even more pronounced under such circumstances, as governments become the de facto insurers of last resort and their implicit liabilities mean that the risks generated become a public burden (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.. . ). 9.5 Inequality: the future If inequality continues to rise, it may become a destabilizing global force that manifests not only in increasing disaster risk but also in decreasing capacities to manage those risks. If inequality is a driver of increasing disaster risk, future projections give no reason to be optimistic. Instead, inequality may well continue to increase in social, economic and territorial terms. As financial capital flows into competitive sectors and locations that provide opportunities for short-term gain, less competitive sectors and locations are left behind. As in the board game Monopoly, where there are winners, by definition there are also losers. Any progress in addressing vulnerability and social resilience, including progress through risk financing, may be ineffective if inequality continues to grow. Socially, the divide between those who have access to financial capital and those who depend on wage labour for their needs continues to grow. All over the world, wealth has become increasingly concentrated since 1990 (Davies et al., 2012 x Davies, James, Rodrigo Lluberas and Anthony F. Shorrocks. 2012,Measuring the Global Distribution of Wealth, 2012 OECD World Forum New Delhi. 17 October 2012.. . ; Piketty, 2014 x Piketty, Thomas. 2014,Capital in the Twenty-First Century, First Edition edition. Belknap Press.. . ; Credit Suisse, 2013 x Credit Suisse. 2013,Global Wealth Report 2013, October 2013. Zurich: Credit Suisse Research Institute.. . ). Wealth is distributed very differently within regions, though most exhibit high levels of inequality (Figure 9.9). Increasing income inequality is closely linked to the race for competitiveness, in which businesses	Page 1 Page 10 Page 20 Page 30 Page 40 Page 50 Page 60 Page 70 Page 80 Page 90 Page 100 Page 110 Page 120 Page 130 Page 140 Page 150 Page 160 Page 170 Page 180 Page 185 Page 186 Page 187 Page 188 Page 189 Page 190 Page 191 Page 192 Page 193 Page 194 Page 195 Page 196 ->Page 197 Page 198 Page 199 Page 200 Page 201 Page 202 Page 203 Page 204 Page 205 Page 206 Page 207 Page 208 Page 209 Page 210 Page 220 Page 230 Page 240 Page 250 Page 260 Page 270 Page 280 Page 290 Page 300 Page 310