Albania Disaster Risk Mitigation and Adaptation Project World Bank presentation to the Ministry of Finance Tirana, April 12, 2008

AL-DRMAP: SEE Disaster Mitigation Issues SEE exposed to a variety of natural disasters Floods Droughts Forest Fires Earthquake Landslides Natural disasters have severe impact on fiscal stability Socio-economic impacts on households and businesses

AL-DRMAP: SEE Disaster Risk Mitigation and Adaptation Program (SEE-DRMAP) Transboundary nature of disasters means that countries must coordinate mitigation and response actions SEE-DRMAP designed to foster regional cooperation on disaster risk mitigation and response: Disaster risk and adaptation framework, disaster preparedness, disaster risk insurance and hedging instruments, risk mitigation and adaptation, contingency financing in case of disasters

AL-DRMAP: Albania Disaster Risk Issues Albania is vulnerable to man-made and natural disaster: floods, earthquakes, droughts, forest fires Effects on the economy and population are exacerbated by lack of disaster preparedness, inadequate data collection and sharing, and lack of insurance

AL-DRMAP: Proposed Project Objective: to strengthen institutional capacities to (a) reduce Albania’s vulnerability to the natural and man-made hazards; and (b) limit human, economic, and financial losses due to these disasters Two-phase adjustable program loan (APL) Ministry of Interior has the overall project implementation responsibilities

AL-DRMAP: Phase 1 Project Components Component 1: Disaster Risk Management and Preparedness (US$4.89 million; Euro 3.16) The component objective is to support capacity building for emergency response mechanism through provision of necessary equipment, and strengthening disaster risk mitigation planning Strengthening Disaster Risk Mitigation Planning and Emergency Management Enhancement of Emergency Response Capacity Implementing Agency: GDCE (MOI)

AL-DRMAP: Phase 1 Project Components Component 2: Strengthening of Hydrometeorological Services (US$2.09 million; Euro 1.35 ) The component objective is to support disaster risk reduction through provision of accurate hydrometeorological forecasts and services tailored to the needs of disaster risk managers in weather-sensitive sectors Implementing Agency: IEWE in cooperation with Synoptic Services and the National Aviation Authority

AL-DRMAP: Phase 1 Project Components Component 3: Development of Building Codes (US$0.36 million; Euro 0.23 million) The component objective is to reduce risks from seismic activities through development of improved building codes and mechanisms for introduction of improved standards develop a national building code train engineers in new design standards develop a mechanism for licensing of engineers. Implementing Agency: MOPWTT

AL-DRMAP: Phase 1 project components Component 4: Catastrophe Insurance (US$2.65 million; Euro 1.71 million) The component objective is provide access to private catastrophe risk insurance to households and small and medium enterprises (SMEs) A one-off equity contribution to the shareholders’ capital of SEE CRIF for Albania to join the insurance pool Public awareness and information campaigns. Implementing Agency: MOF

SEE Catastrophe Risk Insurance Facility (CRIF) DRMAP Insurance Component: - US$2 mm – country equity contribution; - US$0.5 – insurance education campaign and regulatory work Will increase low catastrophe insurance penetration among homeowners and SMEs in Albania by offering affordable high credit quality insurance products (1 out of 100 houses is insured and almost no coverage for business interruption and property damage for SMEs at the moment); the program will also enable the government to reduce its fiscal risk exposure to natural disasters. To achieve better diversification CRIF will be set up as a regional insurance facility serving SEE 10 countries. In Albania, insurance policies will be sold through domestic insurance companies which will receive commissions and access to new clients. All risk originated under these insurance policies will be reinsured with CRIF. CRIF will be established in Switzerland and regulated by the Swiss Insurance Regulator. It will be capitalized by SEE member countries and supported by international donors and global reinsurers. World Bank will ensure the highest technical quality of its operations and risk management program. All technical feasibility work (of the order of US$10 million) will be paid by donors. Albanian government will join as a shareholder and will have a board seat. In 5 years, the government will be given an option to sell its stake in CRIF to private investors at least at its book value or more.

AL-DRMAP: Phase 1 Project Components Component 5: Project Management (US$0.19 million; Euro 0.12 million) The component will finance some project management costs, such as procurement and financial management consultants, monitoring and evaluation activities, incremental operating costs of managing the project and project reporting and audits. Implementing Agency: MOI

AL-DRMAP Project Costs

AL-DRMAP Project Financing

AL-DRMAP: Catastrophe Deferred Drawdown Option (Cat DDO)

AL-DRMAP: Phase 1 Results & Phase 2 Triggers A Disaster Risk Mitigation Strategy and Investment Program formulated and adopted by the Government; Hydrometeorological data is shared among relevant national and regional agencies and effectively disseminated to Albanian decision-makers and regional partners; New building code developed in accordance with European standards; and Mechanisms for participating in the catastrophic risk insurance facility are in place. Phase 2 Triggers A Disaster Risk Mitigation Strategy and Investment Program approved by the Government; Effective publication of data on public website of data gathered with the support of project financing, including digitized climate data; and Government implementation of an institutional arrangement, with clearly defined roles and responsibilities, that facilitates coordination of the three public agencies officially involved in weather monitoring tasks.

FALEMINDERIT