Role of Social Insurance: Social Risk Management Hermann von Gersdorff, World Bank Prague, October 18, 2004

Rethinking Social Protection: Vulnerability and Risk Addressing the poor is not enough; need to recognize the dynamic nature of welfare. Households move in and out of poverty; many live close to the poverty line. Households are exposed to many different shocks and risks over time. Risks affect poor households differently than others and influence their level of vulnerability.

Social Risk Management: Central Elements Accounts for the multiple sources of risk and their characteristics. Operates with multiple strategies (prevention, mitigation, coping) and arrangements (informal, market-based, public) to deal with risk. Attempts to match the multiple suppliers of risk management instruments (such as households, communities, NGOs, and governments) with key demand groups (formal, informal-urban and informal-rural workers)

Risk Management Strategies Prevention Strategies - to reduce the probability of negative risks. Mitigation Strategies - to decrease the impact of a future negative risk; Coping Strategies - to relieve the impact once the risk has occurred.

Risk Management Arrangements Informal, e.g. community support, real assets, marriage Market-based, e.g. cash, bank deposits, insurance Publicly provided or mandated, e.g. social insurance, transfers in cash and kind, subsidies and public works

Role of Social Insurance A new approach Need to consider and work with informal and market based arrangements From a reactive to a proactive approach A new definition: policies aiming at: Helping individuals, households, and communities to better manage risk Supporting the extremely poor