Advancing Disaster Risk Financing and Insurance in ASEAN Member States: Framework and Options for Implementation

Key Findings

• ASEAN Member States are highly exposed to a range of adverse natural events. Each year, on average, the region suffers damage in excess of US$4.4 billion a consequence of natural hazards.
  
• Disasters place a significant fiscal burden on governments in the region and many of them face difficulties in securing adequate and timely funding for early recovery.
  
• Underdeveloped in most ASEAN Member States, private disaster insurance markets have failed to offset a significant share of government contingent liability.
  
• Disaster losses are expected to rise in the future, due to rising exposure and vulnerability, increasing the fiscal burden of disasters if financial and risk management is not improved.
  
• There is growing interest in the region to improve the management of the fiscal burden linked to natural disasters and inter-annual volatility in disaster spending.
  
• Private disaster risk insurance markets show signs of growth which could be further stimulated by public sector engagement. 

Key Recommendations

• Develop risk information and modeling systems to assess the economic and fiscal impact of natural disasters as part of overall fiscal risk management.
  
• Develop disaster risk financing and insurance strategies at the national and subnational levels to manage budget volatility due to disasters and provide disaster insurance coverage for key public assets.
  
• Establish national disaster funds as a financial mechanism to ensure the fast disbursement and execution of funds after a disaster.
  
• Promote private catastrophe risk insurance markets through public-private partnerships and the development of enabling regulatory and risk market infrastructure.
  
• Strengthen regional cooperation on disaster risk financing and insurance, particularly through:
  
  
  1. regional risk information, assessment, and modeling systems;
  2. regional knowledge advisory services and capacity building programs to facilitate knowledge sharing; and
  3. developing a regional vehicle which could leverage international reinsurance and capital markets.

This report is a collaborative effort to deepen knowledge on disaster risk financing and insurance in ASEAN Member States and share global best practice. It is part of a project jointly conducted by the World Bank, the Global Facility for Disaster Reduction and Recovery (GFDRR), the ASEAN Secretariat, and United Nations International Strategy for Disaster Reduction (UNISDR) to promote the development of national and regional disaster risk financing and insurance strategies in ASEAN Member States in the context of a broader disaster risk management agenda.