Financing Disaster Risk Reduction for Sustainable Development in Asia and the Pacific

World leaders gathered in Sendai, Japan in March 2015 at the Third United Nations World Conference on Disaster Risk Reduction (WCDRR) committed to enhancing their efforts to strengthen disaster risk reduction and to reduce disaster losses of lives and assets worldwide. The Secretary-General of the United Nations Ban Ki-moon has highlighted the critical need for financing for disaster risk reduction (DRR) to ensure sustainable development by stating that “disaster risk reduction is the best beginning on our journey to the Addis Ababa meeting in July on financing for development” in his opening remarks at the WCDRR. The Open Working Group proposal for Sustainable Development Goals (SDGs) also pay attention to building resilience to natural disasters by expanding the emphasis from poverty eradication in the previous Millennium Development Goals (MDGs) to addressing challenges in achieving ‘sustained and inclusive economic growth, social development, and environmental protection’. Despite progress made in the Asia-Pacific region since the adoption of the Hyogo Framework for Action (HFA) in 2005, overall investments in DRR measures have not been sufficient. Investments in DRR compete with other public financing needs, and have not been a high priority in many countries. The Global Assessment Report (UNISDR, 2015) states that DRR investments, globally, “represent only 0.1 percent of the US$ 6 trillion per year that will have to be invested in infrastructure over the next 15 years.” As such, the Sendai Framework for Disaster Risk Reduction 2015 – 2030 adopted at the Third WCDRR stresses investing in DRR for resilience as one of its four priorities for action. In light of this priority, the paper discusses how resources are used, and looks at two specific financing tools - parametric insurance and international risk pooling mechanisms - for countries to consider for DRR purposes. Both tools have the potential to significantly reduce disaster risks at multiple levels of society. The first chapter briefly looks at the impacts of natural disasters on sustainable development in Asia and the Pacific as well as the effectiveness of DRR investments. This is followed by an overview of current DRR efforts made by governments and international donors from a financing perspective. The third and fourth chapters give detailed descriptions and analysis of parametric insurance schemes and international risk pooling mechanisms respectively.