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When do you need the finance?

Instruments

Understanding Disaster Finance Instruments

Disaster risk finance instruments are various forms of financing mechanisms available before and/or after natural disasters with a view to provide financial support to affected countries. These financing mechanisms help countries to prepare, respond and recover from the adverse impact of natural disasters.

When do you need the instrument?

Before a disaster (ex-ante)

Most governments have disaster management strategies with clearly defined financial plans. These plans include nationally designed risk retention solutions such as budget contingencies, contingent debt facilities, or insurance solutions. These funds are for usage after a disaster but they are pre-arranged.

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After a Disaster (ex-post)

After a disaster has occurred, governments can also use funds which may not necessarily be pre-arranged. These funds include budget reallocation, emergency tax as well as discretionary post disaster relief packages from development partners

How do you want to treat the financial risk?

Own risk

For disasters of high frequency but low severity, instruments that retain the risk to the government are recommended.

Transfer risk

For low frequency, high severity events, risk transfer instruments can be considered.

 

Own risk

For disasters of high frequency but low severity, instruments that retain the risk to the government are recommended.

Transfer risk

For low frequency, high severity events, risk transfer instruments can be considered.