Leveraging anticipatory action for disaster risk finance: lessons from Bangladesh

If a country already has a functioning anticipatory action system, how much of the existing systems can be leveraged for disaster risk finance?  

This was one of the key questions being considered when the government of Bangladesh, with the support of the World Bank, started developing two new financial instruments to manage flood risks.  

Bangladesh, highly exposed to climate risks, has long been a global innovator in disaster risk management. Initially it was a pioneer of community-based cyclone early warning and preparedness systems, and more recently by linking forecasts to pre-agreed anticipatory action before the disaster occurs. Under these systems, anticipatory action is initiated on the basis of pre-agreed triggers ahead of a predicted disaster, to prevent or reduce impacts on lives and livelihoods and humanitarian needs before they fully unfold. 

Bangladesh was among the first countries to develop a government anticipatory action framework; the National Harmonized Early Action Protocol (NEAP) for riverine floods (finalised in 2024). It outlines the trigger thresholds and coordinated anticipatory actions to be implemented by key government and humanitarian partners (over 30 of them) ahead of forecasted floods.

The opportunity: build out, rather than build again

The design question was, how could the anticipatory action experience and systems already in place for floods in Bangladesh be leveraged for these new financial instruments - a parametric insurance policy and a Community Protection Fund -  designed to release post-shock? Three key opportunities emerged: 

1. Existing understanding of trigger-based approaches: The experience of implementing anticipatory action greatly facilitated understanding inside and outside of government on what the financing instruments were aiming to achieve, i.e., shifting from reacting to disasters towards pre-agreed assistance, backed up by pre-arranged finance, triggered based on agreed thresholds. 
2.  A National framework that defines what a damaging flood looks like: The NEAP, based on community consultation, identifies that assistance is needed when floods last for longer than 3 days above a critical water level, that is captured at a designated gauge station along the Jamuna river. This provided a strong starting point, with government buy-in, for the design of the trigger thresholds.  
3. Existing beneficiary registries and delivery systems: The World Food Programme (WFP) already had a registry of over 200,000 vulnerable persons for their anticipatory action program. They were brought on board as a partner by government, meaning that the work on pre-identifying beneficiaries did not have to start from scratch.  

Overall, the potential emerged to leverage existing investments into triggers and beneficiary registries, and provide a ‘continuum of support’ for anticipatory action beneficiaries through to post-event assistance (described in an earlier blog).

The limits of building disaster risk finance on existing anticipatory action infrastructure 

There were limits that emerged as to the extent to which existing anticipatory action infrastructure could be stretched to inform these disaster risk finance instruments. Four areas emerged in particular: 

1. From forecast-based to observed data: The financial instruments were intended to release funds post-flood, so could not fully adopt the NEAP triggers which were based on forecasts. Instead, significant work was done to identify the best performing indicators of observed flood, which expanded the trigger from just water levels, to also include flood extent and rainfall (see the project FAQs for details). 
2. From a binary trigger to graduated trigger thresholds: Like most anticipatory action protocols the NEAP trigger is binary: this means that it activates like an on/off switch once a forecasted threshold of flood is surpassed. This doesn’t work for disaster risk finance instruments that typically have graduated trigger thresholds whereby the more severe the event, the more funds are released. 
3. From data-led to fully parametric payouts: When the NEAP protocol is triggered, agencies like World Food Programme rapidly prioritise from within their existing beneficiary registry based on expected impacts and funds available. When developing a parametric insurance product, all of this had to be done ahead of time. This meant significant work to develop individual triggers for each  union (small local government area), which when met would automatically trigger a payout to allow all registered beneficiaries in that union to receive cash assistance.   
4. From humanitarian approaches to government-led approaches: The approaches to beneficiary targeting, registration and cash assistance protocols used by World Food Programme differed at times to those that the government would deploy in it’s own social protection programs. This required some flexibility on both sides to allow government financing to layer on top of an existing humanitarian delivery system.

Lessons on leveraging anticipatory action for disaster risk finance for other countries 

Anticipatory action can provide a strong entry point for building disaster risk finance instruments, particularly due to existing capacity, data and trigger designs and delivery systems to rapidly reach beneficiaries. However, this does not mean that a financing mechanism (like parametric insurance) can simply be bolted onto an existing anticipatory action system. As described above, there is likely to be significant work required to adapt the triggers so that they are fit for purpose, and systems too if they currently sit with external organisations. 

To the author’s knowledge, the case of Bangladesh (supported by the World Bank, Weather Risk Management Services [WRMS] and  World Food Programme, with resources from the Global Shield Financing Facility) is the first sovereign disaster risk finance instrument to explicitly leverage existing anticipatory action programs in this way. This has offered a practical application of efforts to link anticipatory action, disaster risk finance and adaptive social protection, and will continue to generate lessons learnt that are relevant to other countries and contexts.