Planning for Disasters and the Economics of Disaster Risk Financing and Insurance

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In the aftermaths of disaster events, a systematic recovery and reconstruction phase is often hampered by strategic interactions between the national government, subnational government, donors, and affected people. As a result, recovery processes may be characterized by delays in response, underutilization of economies of scale, and reliance on costly financing instruments. These pre- and post-disaster inefficiencies can lead to a sluggish recovery process and increase both the economic and human cost of disasters. By developing solid plans for disasters, such inefficiencies can be avoided and a better humanitarian and disaster risk reduction system can be achieved. In particular, in order to better prepare for disaster events, governments should have (i) a coordinated plan for post-disaster action agreed in advance, (ii) clearly defined rules and triggers for disaster response, and (iii) risk financing to ensure that the plan can be implemented in the event of a disaster.

Clarke, D., Dercon, S. "Planning for Disasters and the Economics of Disaster Risk Financing and Insurance" Ferdi Policy Brief B123, November 2015