1. Paul Freeman, Leslie Martin Nov 15-16, 2001
Regional Policy Dialogue
Inter-American Development Bank
National Systems and Institutional Mechanisms for the Comprehensive Management of Disaster Risk
Paul Freeman, Leslie Martin
Nov 15-16, 2001

2. Background
In Latin America and the Caribbean, average frequency of 40 significant disasters a year
Region second only after Asia in the number of disasters impacting the region

3. Vulnerability
Disasters due to interaction between human settlement and the natural environment:
Settlement in high-risk areas
Limited enforcement of building codes
Deforestation
Reducing the toll of natural disasters requires a comprehensive approach that accounts for the causes of a society’s vulnerability to disasters

4. Comprehensive Key Elements of Risk Management Pre-Disaster Phase
Post-Disaster Phase
Risk Identification
Mitigation
Risk Transfer
Preparedness
Emergency Response
Rehabilitation and Reconstruction
Hazard assessment (frequency, magnitude and location)
Physical/structural mitigation works
Insurance/reinsurance of public infrastructure and private assets
Early warning systems. Communication systems
Humanitarian assistance
Rehabilitation/reconstruction of damaged critical infrastructure
Vulnerability assessment (population and assets exposed)
Land-use planning and building codes
Financial market instruments (catastrophe bonds, weather-indexed hedge funds)
Contingency planning (utility companies/ public services)
Clean-up, temporary repairs and restoration of services
Macroeconomic and budget management (stabilization, protection of social expenditures)
Risk assessment (a function of hazard and vulnerability)
Economic incentives for promitigation behavior
Privatization of public services with safety regulation (energy, water, transportation, etc.)
Networks of emergency responders (local/ national)
Damage assessment
Revitalization for affected sectors (exports, tourism, agriculture, etc.)
Hazard monitoring and forecasting (GIS, mapping, and scenario building)
Education, training and awareness about risks and prevention
Calamity Funds (national or local level)
Shelter facilities. Evacuation plans
Mobilization of recovery resources (public/ multilateral/ insurance)
Incorporation of disaster mitigation components in reconstruction activities

5. National Disaster Systems
The task facing policy makers today is to create an effective national system
with a comprehensive vision
that engages senior government policy makers,
supports local decision making and initiatives,
and promotes the institutional conditions necessary for the constructive involvement of private-market initiatives

6. Country Experiences USA, Japan, France, UK: Colombia, Nicaragua
Successful market-based risk transfer programs
Colombia, Nicaragua
Towards comprehensive government-led systems
Hungary, India
Towards community-driven projects

7. Tradeoffs Government-directed: Community-directed
Structural mitigation projects
Reconstruction financing, risk transfer
Bureaucratic
Community-directed
Less comprehensive
Nonstructural mitigation projects
Fewer financing alternatives

8. Successful National Systems
Explicit and appropriate national disaster strategy
integrates with national policy on development and environmental protection
based on vulnerability assessments
Key players part of disaster management process
- finance ministry
- local community leaders, NGOs
- private market actors
Provisions to ensure sufficient resources for key players to carry out their responsibilities

9. National Disaster Strategy
Legislation
Allocating responsibilities
Integrating with development goals
Based on vulnerability assessments

10. Involving Key Players
National Disaster Council: identifies priorities and channels resources
National Disaster Management Office: administers day-to-day operations
Operations Control Group: prepares and coordinates emergency response

11. Role of Finance Ministries
Participation of finance ministries:
helps to ensure funding for the institutional framework
facilitates the incorporation of disaster management into development policy
and provides incentives for financing mitigation projects.

12. Financial Resources On-going operation of a national system
Providing incentives for funding risk mitigation projects
mitigation occurs when the interests of the ultimate risk bearer are aligned with the party incurring the cost of mitigation
Financing post disaster reconstruction
reserve funds
contingent loans
risk transfer (reinsurance, CAT bonds)

13. Risk Transfer
In the higher income countries, 30% of the loss from natural hazards is insured. In the poorer countries, insurance covers 1% of the losses from natural hazards

14. Risk Transfer Advantages of insurance: Limitations of insurance
permits the spreading of risk between parties; guarantees victims compensation for losses
reduces the variance of risk for each person
permits the segregation of risk
encourages loss reduction measures
provides a tool to monitor and control behavior
Limitations of insurance
premiums may not reflect risk: less equity and less incentive to mitigate
demand for insurance may be low due to misperceived risk or high discount rates
moral hazard may increase losses
Insurance may not be available in highest-risk areas

15. Political Sustainability
recognized success of the system in reducing vulnerability to and speeding recovery from disasters
integration with overall development goals
legislation supporting the national disaster strategy
programs to maintain an adequate perception of risk, particularly in periods when few disasters happen.
constituencies that support the political agenda needed to implement and carry out a program
frame the natural disaster system as a poverty issue
structures to make different organizations and individuals accountable for their disaster management responsibilities when events strike.

16. Financial Sustainability
Political support
Committing to long-term financing contracts with external parties
Responding to pressure from the international finance community

17. Conclusion
A comprehensive approach requires the commitment of the national government
and accommodates and supports local decision making and initiatives.
That commitment needs the attention of those directing development policies.
As well, the role of risk transfer as a de-centralized, market initiative is important and, in the case of high exposure, will rely on a supporting role by the national government.