Donors support disaster risk financing, insurance

International donors have expressed support for disaster risk financing and insurance (DRFI), to help vulnerable countries improve financial resilience against climate and disaster risk. 

Collaborations are critical to allow the Disaster Risk Insurance and Financing Initiative (DRFI) to develop and implement innovative instruments and tools that help mitigate the financial risk of natural disasters to vulnerable countries. 

Among the donors and partners are: the Swiss State Secretariat for Economic Affairs (SECO); Government of Japan; the Netherlands Ministry of Foreign Affairs; United Kingdom’s Department for International Development (DFID); and the United States Agency for International Development (USAID)

Others include the ACP-EU Natural Disaster Risk Reduction Program (ACP-EU NDRR), an initiative of the African, Caribbean, and Pacific Group of States, and Germany’s Ministry for Economic Cooperation and Development (BMZ).

Specifically, the Africa Disaster Risk Financing (ADRF) Initiative was launched in 2015, financed by the European Union (EU), and implemented by the World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR), as part of the Africa, Caribbean and Pacific (ACP) – EU Programme, Building Disaster Resilience in Sub-Saharan Africa.

The Initiative works with 19 African countries to develop and implement tailored financial protection policies and instruments which can help them respond quickly and resiliently to disasters. The ADRF Initiative is the first programme in Africa to focus on the broad disaster risk finance (DRF) agenda. 

The ADRF Initiative supports agriculture insurance programmes, which unlock critical assess to credit for low-income farmers in Kenya, Uganda and Rwanda. 

Since its inception, the ADRF Initiative has focused on three areas to pioneer DRF in Africa: gathering and developing disaster risk information; developing DRF strategies to achieve national financial protection priorities; and sharing knowledge and lessons learned.

In sub-Saharan Africa (SSA) for instance, the decade between 2005 and 2015, the region experienced an average of 157 disasters yearly, which claim about 10,000 people annually. This is in addition to natural hazards including drought in the Horn of Africa, floods in Mali and Rwanda, and landslides in Ethiopia and Uganda. 

Experts say disasters can have a debilitating impact on countries’ growth and development prospects. Losses from disasters are only expected to rise as the impacts of climate change intensify across the region. Given these challenges, governments have often been reliant on external aid and budget reallocation to pay for disaster recovery. 

However, this financing strategy comes at a cost. Uncertainty and delays in aid flows tend to complicate planning for relief and recovery efforts, and budget reallocations can divert funding from vital development programmes.

DRF aims to strengthen countries’ ability to manage economic and fiscal stresses when disasters strike. There is no one-size-fits-all approach to disaster risk financing—countries have a wide array of financial protection policies and instruments to consider, including sovereign risk finance, social protection programmes, as well as agriculture and risk insurance programmes. 

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