1. The World Bank’s Role in Disaster Mitigation Financing the Risks of Natural Disasters June 3, 2003 Alcira Kreimer Manager, Disaster Management Facility

2. The Cost of Natural Disasters The poor are extremely vulnerable to natural disaster hazards. In 2002, the economic losses caused by natural disasters reached $55 billion US ($20 billion more than in 2001), mainly due to the floods in Europe. Direct costs of natural disasters: physical damage to infrastructure, raw materials, buildings, homes, etc. Indirect costs: loss of earnings, unemployment, loss of productivity due to death, illness and injuries, public finance expenditure Mexico City, Mexico

3. 0 2 4 6 8 10 12 14 16 19501955196019651970197519801985199019952000 Flood Windstorm Earthquake Others Number As of March 1, 2002© 2002 GeoRisks Research Dept., Munich Re Natural Catastrophe Trends, 1950-2002 Increasing Frequency and Severity of Natural Disasters

4. The World Bank’s Natural Disaster-related Funding by Region, 1980-2003: $38.3 billion

5. Natural Disaster Activities by Sector The World Bank’s Natural Disaster Funding by Theme, 1980-2003

6. World Bank Operational Policy 8.50 Revised in 1995, OP 8.50 states that World Bank emergency assistance may include: Assessing the impact of the disaster and developing a recovery strategy Restructuring the country’s existing portfolio The redesign of pipeline projects The provision of an emergency recovery loan (ERL) The World Bank may also support freestanding investment projects for prevention and mitigation in countries prone to disasters.

7. Natural Disaster Projects that Incorporate Mitigation Measures (1998) Emergency Recovery and Disaster Management Program in OEC countries (St. Kitts & Nevis, St. Lucia, Dominica, Grenada, St. Vincent & the Grenadines) (2000) Natural Disaster Management in Mexico (2002) Urban Natural Hazard Vulnerability in Algeria (2002) Gujarat Emergency Earthquake Reconstruction Program in India (2003) Natural Disaster Mitigation in Vietnam

8. Meeting the Challenge: The Disaster Management Facility Objectives: Promote a more strategic World Bank response to disaster emergencies Integrate disaster prevention and preparedness in development efforts The DMF supports World Bank operations and clients through: technical support corporate strategy, policy analysis, policy development knowledge generation in partnership with Bank departments/networks and external partners learning events for World Bank staff and clients

9. Why Is Prevention Important? Reallocation of expenditure following a disaster threatens long-term development Responding to disasters undermines planning and budgeting Natural disasters can adversely affect balance of payments Investors demand higher rates of return to finance post disaster reconstruction Reconstruction many times rebuilds the same level of vulnerability and sets the stage for future disasters

10. What can we do to reduce losses? 1.Provide incentives for investments in prevention and mitigation both for the public and the private sectors 2.Strengthen the institutional capacity and regulatory frameworks to reduce vulnerability 3.Define structural and non-structural mechanisms to reduce losses 4.Ensure that all development efforts contribute to disaster risk reduction

11. Components of an Effective Risk Management Strategy Risk identification –Hazard maps; GIS systems, vulnerability analysis; understanding direct, indirect, and secondary effects of disasters; include disaster risk analysis as part of project design Risk reduction –Structural and non-structural mechanisms (e.g. land use planning, structural design and construction practices, building codes, early warning systems, preparedness and response plans) Risk transfer and financing –insurance, safety nets, calamity funds, micro-insurance, informal arrangements

12. Risk Management must be a formal component of development planning. Through planning, countries can reduce some of the negative impacts on development and improve the situation of the poor during and after crises.