World Bank supports Central Asia Multi-Peril Risk Assessment

FULL ORIGINAL PUBLICATION HERE

Central Asian countries will benefit from a better understanding of their natural disaster risks, which in time could lead to greater use of risk transfer, insurance and reinsurance capacity in the region, as the World Bank supports a multi-peril risk assessment project for the region.

One of the first steps in moving towards sovereign disaster risk transfer, such as use of insurance, reinsurance or catastrophe bond type arrangements, tends to be in the development of risk modelling tools to enhance the understanding of exposures in a country.

To that end, the World Bank, alongside its partners, has launched an initiative to provide a multi-peril risk assessment of natural disaster risks, including earthquakes, floods and selected landslides within the Central Asia region.

Tre Hapa për të Ndihmuar Shqipërinë për të Përballuar Ndikimet Financiare të Shkaktuara nga Fatkeqësitë dhe Krizat

PUBLIKIMI I PLOT ORIGJINAL KTU

Në vitin 2019, Shqipëria u përball me një seri tërmetesh, ndër të cilët edhe një me magnitudë të lartë; më pas, mes përpjekjeve për rindërtim në vitin 2020, u godit edhe nga pandemia COVID-19. E përballur me nevojat e shumta në rritje, mbështetja e qeverisë shqiptare shkoi për të varfërit dhe personat e prekur nga fatkeqësitë dhe krizat, përfshirë këtu edhe bizneset. Për ta realizuar këtë, ajo shfrytëzoi rezervat fiskale, rishpërndau buxhetet për përparësitë urgjente dhe u mbështet tek ndihma e jashtme. Shumë nga këto masa u ndërmorën në bazë të nevojës.

Në shtator 2020, Banka Botërore së bashku me Ministrinë e Financave dhe Ekonomisë,  kreu vlerësimin diagnostikues në lidhje me financimin e riskut të fatkeqësive në Shqipëri.[1] Kjo përpjekje kishte për qëllim identifikimin e mangësive të financimit të mekanizmave për gatishmërinë financiare të vendit në rast fatkeqësish dhe rekomandimin e mënyrave për përmirësimin e tyre.

Menaxhimi i riskut të fatkeqësive është ndër përparësitë kryesore të politikave në Republikën e Shqipërisë dhe, pak kohë para tërmetit, qeveria shqiptare kreu edhe një seri reformash në këtë drejtim, si për shembull: miratimi i Ligjit të ri për Mbrojtjen Civile, racionalizimi i kornizave institucionale, decentralizimi i funksioneve që aktivizohen pas fatkeqësive dhe vënia në dispozicion e strukturave të nevojshme për fondet e emergjencës në nivel vendor dhe në nivel ministrie të linjës.

Three Steps to Help Albania Withstand the Financial Impacts of Disasters and Crises

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In 2019, Albania experienced a series of earthquakes, including a major one; then, amid reconstruction efforts in 2020, it was hit by the COVID-19 pandemic. Confronting multiple increasing needs, the government of Albania supported the poor and those affected by disasters and crises, including businesses. To do so, it tapped into its fiscal reserves, reallocated budgets toward urgent priorities, and relied on external assistance. Many of these measures were ad hoc.

In September 2020, jointly with Albania’s Ministry of Finance and Economy, the World Bank completed a diagnostic of disaster risk finance in Albania[1]. This effort sought to identify financing gaps in—and recommend ways to improve—the country’s financial preparedness for disasters.

Disaster risk management is among Albania’s key policy priorities, and the Albanian government carried out a series of reforms shortly before the earthquake: for instance, it enacted a new Law on Civil Protection, streamlined institutional frameworks, decentralized post-disaster functions, and put in place structures for contingency funds at the local and line ministry level.

Can insurance-linked securities mobilize investment in climate adaptation?

ORIGINAL PUBLICATION HERE

The cost of adapting to climate change increases every year. Between now and 2030, adaptation in developing countries is projected to cost US$180 billion annually and skyrockets to US$280-500 billion as we get closer to 2050. The past five years are among the warmest ever recorded and the economic impacts from tropical storms, droughts and wildfires are reaching record levels around the world. Despite the need to improve our resilience, investments in early warning systems, climate resilient infrastructure, improved agriculture, natural capital such as mangroves and coral reefs, and water resource management, have remained stagnant. Adaptation finance still represents a fraction of overall climate finance and less than 20 percent of what is needed, even if absolute numbers are slowly rising US$22 to US$35 billion from 2016 to 2018).

But closing the gap between current adaptation financing levels and the need is a challenge. Public sector budgets are maxed out and attracting desperately needed private investment remains notoriously elusive. The challenge to mobilizing private investment into adaptation and resilience projects has always been–how do we get our money back? While we’ve been debating adaptation’s return on investment, the damages from intensifying hurricanes, wildfires, and droughts as a result of the climate crisis have cost hundreds of billions of dollars and displaced millions of people.

China’s Belt and Road Initiative could kick-start ILS in Asia

ORIGINAL PUBLICATION HERE. INTELLIGENT INSURER OWN WEBSITE PUBLICATION HERE

The countries of China’s Belt and Road Initiative (BRI) are largely unsupported by insurance and would benefit from the introduction of insurance-linked securities (ILS) into the region, according to Kirill Savrassov, chief executive of Phoenix CRetro.

Speaking in an Intelligent Insurer Re/insurance Lounge webinar titled “New domiciles, new risks, new structures: another evolution for ILS”, which took place ahead of SIRC 2020 Re-Mind, Savrassov highlighted how a cat event in one of those countries could cause wider repercussions for the delivery of the BRI.

“Those countries are receiving billions and billions of investment into their transport and critical infrastructure but remain uninsured and uncovered for large natural disasters,” he said.

Governments and institutions bet big on CAT bonds

ORIGINAL PUBLICATION HERE. HARD PAPER VERSION HERE

There is something magical about the word bonds as it is closely linked with all facets of our life. But in the world of business, bonds are financial instruments that are used by governments and institutions to tide over funding difficulties in times of stress. And at no other time has it been more pronounced than at this juncture when businesses all over the world are reeling from the impact of the COVID-19 pandemic.

My interest in the topic was aroused when my old friend T.B.Nair, an independent analyst in the southern Indian city of Bengaluru, told me about how catastrophe bonds are gaining ground in the global marketplace. Nair told me that catastrophe bonds or CAT bonds are now becoming the instrument of choice for several countries to insure big transnational infrastructure projects from natural disasters. He even went on to suggest that CAT bonds would have been of great help for India to overcome the economic hardships arising from cyclones, floods etc.

Jamaica still aims for catastrophe bond with World Bank support

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The Government of Jamaica will continue to work alongside the World Bank and other multi-lateral groups to increase its disaster insurance protection this year, even though its priority is a swift economic recovery after the Covid-19 pandemic.

Jamaica had been planning a catastrophe bond issuance for this year, to enhance its disaster insurance arrangements.

The cat bond deal, which has been a work-in-progress for some years now, as we’ve documented regularly, was forcibly delayed by the Covid-19 pandemic, as financial market volatility due to the coronavirus outbreak put the Caribbean island nations’ first cat bond issuance on-hold, the country’s finance minister previously said.

Catastrophe bonds a win-win for governments & investors, says APEC

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The Asia-Pacific Economic Cooperation (APEC) continues to see the development of a regional catastrophe bond market as positive, highlighting at a recent workshop that cat bonds are a win-win relationship for governments and investors.

The workshop last week was convened by The World Bank Treasury alongside the APEC Business Advisory Council (ABAC) and Asia-Pacific Financial Forum, to educate on the use of catastrophe bonds as disaster risk transfer instruments for the APEC Regional Disaster Risk Financing and Insurance Solutions Working Group.

The goal is to expand the understanding of the role catastrophe bonds can play, as well as the important role insurance and reinsurance risk transfer products play in protecting the fiscal budgets of countries against impactful natural disasters.

Parametric sovereign cat bonds: the way to insure the Belt and Road

ORIGINAL PUBLICATION HERE. PDF VERSION HERE. CHINESE 中文 TRANSLATION HERE .

Countries in Central Asia and Eastern Europe that have been recipients of Chinese investment via projects associated with its Belt and Road Initiative (BRI) should use parametric sovereign cat bonds to insure themselves against the risk of natural disasters.

That is the view of Kirill Savrassov, an insurance-linked securities (ILS) and sovereign risk transfer specialist.

“China’s Belt and Road Initiative has created an even greater need for comprehensive protection solutions in Central Asia and Eastern Europe,” said Savrassov.

“China has spent tens of billions of dollars in infrastructure across the region but practically none of it is properly insured against physical damage, despite the region being at high risk from earthquakes and other natural disasters.

“In countries such as Uzbekistan, Kazakhstan or Tajikistan it is not a question of if an earthquake will hit, but when and how devastating it will be.”

Sovereign Parametric Catastrophe Bonds as means to address the protection gap in emerging countries

As mentioned by AON in their Weather, Climate & Catastrophe Insight: 2019  Annual Report, last year brought $232 billion of economic losses from natural disasters whereby only $71 billion was actually insured. It outlined that the world continue to face a fundamental issue of insurance gap, especially in emerging and developing countries, where losses for businesses and governments are only increasing following a decade-long rise in natural catastrophes linked to the climate change.

Protection gaps exist in both emerging and developed markets. However, with estimated by Swiss Re 35% level of catastrophe risk coverage in advanced economies versus 6% in emerging economies, the issue is far more important for the developing world, where the cost of disasters is not just measured in the deaths and injuries that they cause, but also in their long lasting economic impact on survivors and countries. Natural disasters there do not just destroy homes, factories, shops and fields; they can altogether annihilate years of economic growth, which is essential for the low and mid-income countries.