Terminology

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Risk transfer

Source(s):  United Nations Office for Disaster Risk Reduction (UNISDR) [ 2 February 2017 ]

Definition:
The process of formally or informally shifting the financial consequences of particular risks from one party to another, whereby a household, community, enterprise or State authority will obtain resources from the other party after a disaster occurs, in exchange for ongoing or compensatory social or financial benefits provided to that other party. Annotation: Insurance is a well-known form of risk transfer, where coverage of a risk is obtained from an insurer in exchange for ongoing premiums paid to the insurer. Risk transfer can occur informally within family and community networks where there are reciprocal expectations of mutual aid by means of gifts or credit, as well as formally, wherein governments, insurers, multilateral banks and other large risk-bearing entities establish mechanisms to help cope with losses in major events. Such mechanisms include insurance and reinsurance contracts, catastrophe bonds, contingent credit facilities and reserve funds, where the costs are covered by premiums, investor contributions, interest rates and past savings, respectively.


  • About the Terminology The UNISDR Terminology aims to promote a common understanding and usage of disaster risk reduction concepts and to assist the disaster risk reduction efforts of authorities, practitioners and the public.

Please note: The 2009 Terminology was updated following the request of the Sendai Framework for Disaster Risk Reduction (paragraph 50), which recommended the establishment of an open-ended intergovernmental expert working group.