Country perspectives on pre-arranged financing: Kenya, Malawi, Nigeria, Senegal and Zambia

This report presents the first cross-country study to use a structured simulation to elicit how policymakers in five African countries — Kenya, Malawi, Nigeria, Senegal, and Zambia — value the core attributes of pre-arranged financing (PAF) systems for disaster response. As climate-related and geophysical shocks become more frequent and costly, PAF instruments (such as contingent credit lines, parametric insurance, and catastrophe bonds) are designed to deliver rapid, predictable liquidity, yet uptake remains limited in low- and middle-income countries: between 2017 and 2021, low-income countries received only USD 0.3 per capita in international PAF financing versus USD 12.4 per capita for high-income countries. To understand the demand side, the study ran an interactive disaster-risk-financing simulation with roughly 190 government officials, in which participants made repeated financing decisions under realistic fiscal and disaster scenarios while stating their willingness to pay (WTP) for PAF. Its central conceptual innovation is the distinction between anticipated disasters (where speed of disbursement raises effectiveness) and unanticipated ones (where flexibility in triggers and use of funds matters most), complemented by a post-simulation survey, debrief discussions, a desk review, and key informant interviews.

The study finds that policymakers value PAF for both small, frequent and large, infrequent disasters despite its opportunity cost, with consistently higher demand for large-disaster coverage — the median participant was willing to pay about USD 50 million (the actuarially fair cost) for small-disaster coverage and an additional USD 20 million for large-disaster coverage. Speed and flexibility are valued as distinct attributes addressing different dimensions of performance: participants were willing to pay somewhat more for speed in absolute terms (about USD 3.9M versus USD 3.0M for flexibility), but notably they paid less than the expected efficiency gain for speed while paying at least the expected gain for flexibility — and valued flexibility especially for large, infrequent disasters — signalling strong aversion to the risk of response system non-performance rather than purely actuarial calculation. Crucially, speed and flexibility are seen as neither substitutes nor complements, implying that well-designed systems may need to deliver both. Willingness to pay rises non-linearly with fiscal space — increasing as budgets grow from low to intermediate levels but plateauing beyond roughly USD 250 million — which suggests the most fiscally constrained countries may be least able to commit to PAF even where welfare gains are highest, pointing to a role for concessional or grant-based financing. Political incentives modestly raise overall demand but do not reshape attribute preferences, and survey and debrief evidence underscores a third valued dimension: mobilising internal and external expertise for risk profiling and scenario planning, which can reduce the share of disasters that go unanticipated and thereby strengthen the case for high-speed arrangements