GAR 2015 Main Report

260

Chapter 13

may face when confronted with large disasters. As highlighted in Chapter 5, many governments lack the financial resilience to absorb the impact and recover from a 1-in-100-year loss. Similarly, disaster risks need to be considered in a broader view of the risks associated with lending to governments, businesses or households in hazardexposed countries. This encoding of disaster risk into financial decision-making should be regarded as a basic principle of sound risk management.

Disaster risk metrics also need to be considered in the formulation of credit and debt ratings, in indices that measure the attractiveness of sectors and countries for investment, and in performance forecasts for both businesses and countries. Disaster risks should also be disclosed by way of statutory reporting on the part of businesses, financial institutions and governments. Encoding risk metrics into these broader investment metrics is critical to changing investor behaviour and increasing awareness of disaster risks in a broader risk perspective.

Expanding offers of risk financing and social protection

At the same time, this broader approach to calculating the costs and benefits of risk management may also provide a better rationale for the expansion of risk financing and social protection measures to low-income households, small businesses and weak local governments.

Many innovative mechanisms for insurance and social protection have been piloted. However, unless the parameters for calculating their costs and benefits change, it is unlikely that there will be a significant shift in the current situation where the insurance and reinsurance sector is overcapitalized while a vast majority of households and businesses in low and middle-income countries have no access to insurance or other forms of risk financing.

If the broader benefits of strengthened resilience and rapid recovery could be calculated, then it is likely that the benefit-cost ratio of investments in social protection and accessible insurance cover would become more attractive. Currently, the fact that disaster impacts such as deteriorating health and nutrition or lost educational opportunities are not considered part of the opportunity cost arising from a lack of social protection is an obstacle to increasing coverage substantially.

Extensive risk and social demand

Everyday risk and extensive disaster risk are not externalities to poverty reduction; they are central characteristics of poverty. National and international poverty reduction, access to education and improvements in health cannot be achieved if the accelerating loss of schools, health facilities, housing and local infrastructure through extensive disasters continues to be ignored and discounted.

Social demand for clean water, waste disposal, security, employment, adequate housing, transport and access, education and health does not need to be promoted because it already exists in forms that reflect the specificity of local contexts. In contexts with high levels of (mainly) extensive risk, this social demand often includes protection from loss and damage. As such, the satisfaction of basic needs and the creation of opportunities for local social and economic development can become a vehicle and an opportunity to address disaster risks at their source.

If awareness extends from extensive risk to the underlying risk drivers, then the link to transforming local development becomes explicit and obvious. The conservation of a local watershed may improve the quality and availability of drinking water and reduce flood risk. Developing systems to collect and recycle household waste may

	260 Chapter 13 may face when confronted with large disasters. As highlighted in Chapter 5, many governments lack the financial resilience to absorb the impact and recover from a 1-in-100-year loss. Similarly, disaster risks need to be considered in a broader view of the risks associated with lending to governments, businesses or households in hazardexposed countries. This encoding of disaster risk into financial decision-making should be regarded as a basic principle of sound risk management. Disaster risk metrics also need to be considered in the formulation of credit and debt ratings, in indices that measure the attractiveness of sectors and countries for investment, and in performance forecasts for both businesses and countries. Disaster risks should also be disclosed by way of statutory reporting on the part of businesses, financial institutions and governments. Encoding risk metrics into these broader investment metrics is critical to changing investor behaviour and increasing awareness of disaster risks in a broader risk perspective. Expanding offers of risk financing and social protection At the same time, this broader approach to calculating the costs and benefits of risk management may also provide a better rationale for the expansion of risk financing and social protection measures to low-income households, small businesses and weak local governments. Many innovative mechanisms for insurance and social protection have been piloted. However, unless the parameters for calculating their costs and benefits change, it is unlikely that there will be a significant shift in the current situation where the insurance and reinsurance sector is overcapitalized while a vast majority of households and businesses in low and middle-income countries have no access to insurance or other forms of risk financing. If the broader benefits of strengthened resilience and rapid recovery could be calculated, then it is likely that the benefit-cost ratio of investments in social protection and accessible insurance cover would become more attractive. Currently, the fact that disaster impacts such as deteriorating health and nutrition or lost educational opportunities are not considered part of the opportunity cost arising from a lack of social protection is an obstacle to increasing coverage substantially. Extensive risk and social demand Everyday risk and extensive disaster risk are not externalities to poverty reduction; they are central characteristics of poverty. National and international poverty reduction, access to education and improvements in health cannot be achieved if the accelerating loss of schools, health facilities, housing and local infrastructure through extensive disasters continues to be ignored and discounted. Social demand for clean water, waste disposal, security, employment, adequate housing, transport and access, education and health does not need to be promoted because it already exists in forms that reflect the specificity of local contexts. In contexts with high levels of (mainly) extensive risk, this social demand often includes protection from loss and damage. As such, the satisfaction of basic needs and the creation of opportunities for local social and economic development can become a vehicle and an opportunity to address disaster risks at their source. If awareness extends from extensive risk to the underlying risk drivers, then the link to transforming local development becomes explicit and obvious. The conservation of a local watershed may improve the quality and availability of drinking water and reduce flood risk. Developing systems to collect and recycle household waste may	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 190 Page 200 Page 210 Page 220 Page 230 Page 240 Page 250 Page 251 Page 252 Page 253 Page 254 Page 255 Page 256 Page 257 Page 258 Page 259 Page 260 Page 261 ->Page 262 Page 263 Page 264 Page 265 Page 266 Page 267 Page 268 Page 269 Page 270 Page 271 Page 272 Page 273 Page 274 Page 280 Page 290 Page 300 Page 310