Disaster Risk Financing and Contingent Credit : A Dynamic Analysis
This paper aims to assist policy makers interested in establishing or strengthening financial strategies to increase the financial response capacity of developing country governments in the aftermath of natural disasters, while protecting their lon...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110620100433 http://hdl.handle.net/10986/3457 |
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okr-10986-34572021-04-23T14:02:10Z Disaster Risk Financing and Contingent Credit : A Dynamic Analysis Clarke, Daniel Mahul, Olivier AGRICULTURAL INSURANCE AMOUNT OF RISK ATTACHMENT POINT BANK POLICY BASIS RISK BORROWING CAPITAL COST CAPITAL MARKET CAPITAL MARKET DEVELOPMENT CASH FLOW CATASTROPHES CATASTROPHIC RISKS CC CLAIM CLAIM PAYMENTS COMMITMENT LOAN CONSUMPTION SMOOTHING CONTINGENT DEBT COST OF CAPITAL CREDIT CONTRACT CREDIT FACILITY CREDIT INSTRUMENTS DEBT DEDUCTIBLE DEVELOPING COUNTRIES DEVELOPING COUNTRY DIRECT CREDIT DIRECT LOANS DISASTERS DISBURSEMENT DISCOUNT RATE DIVERSIFICATION EARTHQUAKE INSURANCE ECONOMICS ELIGIBLE BORROWERS EMERGING MARKET EMERGING MARKET COUNTRIES EXPENDITURE FARMER FINANCIAL ANALYSIS FINANCIAL CAPACITY FINANCIAL CAPITAL FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL PRODUCT FINANCIAL TOOL FISCAL BALANCE FULL REPAYMENT FUTURE CASH FLOWS FUTURE LOAN GLOBAL CAPITAL GLOBAL CAPITAL MARKET GOVERNMENT EXPENDITURE GOVERNMENT SUBSIDIES GRACE PERIOD HIGH INTEREST RATE HOUSEHOLDS INDEMNIFICATION INSURANCE CLAIM INSURANCE CLAIMS INSURANCE PREMIUM INTEREST COST INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL FINANCIAL INSTITUTIONS LENDER LENDERS LIABILITY LINE OF CREDIT LIQUID ASSETS LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LOAN LOAN CAPITAL LOAN FACILITY LOAN REPAYMENT LOAN REPAYMENTS LOW INTEREST RATE MARKET DEVELOPMENT MATURITY NATURAL DISASTER NATURAL DISASTERS OPERATING COSTS OPPORTUNITY COST OUTSTANDING DEBT OUTSTANDING LOAN PERPETUITY POLICYHOLDERS POLITICAL ECONOMY PORTFOLIO PUBLIC FINANCES RATE OF RETURN RATES REINSURANCE REINSURANCE PREMIUMS REINSURERS RELATIONSHIP BANKING REPAYMENT REPAYMENT SCHEDULE RESERVE RESERVE FUND RESERVE FUNDS RESERVES RETURN RETURNS RISK CAPITAL RISK MANAGEMENT RISK NEUTRAL RISK PROFILES RISK TRANSFER SAVINGS SECURITIES SHORT-TERM LIQUIDITY SOVEREIGN RISK STOP LOSS REINSURANCE TAX TAX REVENUES This paper aims to assist policy makers interested in establishing or strengthening financial strategies to increase the financial response capacity of developing country governments in the aftermath of natural disasters, while protecting their long-term fiscal balance. Contingent credit is shown to increase the ability of governments to self-insure by relaxing their short-term liquidity constraints. In many situations, contingent credit is most effectively used to facilitate risk retention for middle layers, with reserves used for bottom layers and risk transfer (for example, reinsurance) for top layers. Discussions with governments on the optimal use of contingent credit instruments as part of a sovereign catastrophe risk financing strategy can be guided by the output of a dynamic financial analysis model specifically developed to allow for the provision of contingent credit, in addition to reserves and/or reinsurance. This model is illustrated with three country case studies: agricultural production risks in India; tropical cyclone risk in Fiji; and earthquake risk in Costa Rica. 2012-03-19T18:02:48Z 2012-03-19T18:02:48Z 2011-06-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110620100433 http://hdl.handle.net/10986/3457 English Policy Research working paper ; no. WPS 5693 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper Latin America & Caribbean Latin America & Caribbean South Asia South Asia The World Region The World Region East Asia and Pacific East Asia and Pacific Central America America Oceania South Asia Asia |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
AGRICULTURAL INSURANCE AMOUNT OF RISK ATTACHMENT POINT BANK POLICY BASIS RISK BORROWING CAPITAL COST CAPITAL MARKET CAPITAL MARKET DEVELOPMENT CASH FLOW CATASTROPHES CATASTROPHIC RISKS CC CLAIM CLAIM PAYMENTS COMMITMENT LOAN CONSUMPTION SMOOTHING CONTINGENT DEBT COST OF CAPITAL CREDIT CONTRACT CREDIT FACILITY CREDIT INSTRUMENTS DEBT DEDUCTIBLE DEVELOPING COUNTRIES DEVELOPING COUNTRY DIRECT CREDIT DIRECT LOANS DISASTERS DISBURSEMENT DISCOUNT RATE DIVERSIFICATION EARTHQUAKE INSURANCE ECONOMICS ELIGIBLE BORROWERS EMERGING MARKET EMERGING MARKET COUNTRIES EXPENDITURE FARMER FINANCIAL ANALYSIS FINANCIAL CAPACITY FINANCIAL CAPITAL FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL PRODUCT FINANCIAL TOOL FISCAL BALANCE FULL REPAYMENT FUTURE CASH FLOWS FUTURE LOAN GLOBAL CAPITAL GLOBAL CAPITAL MARKET GOVERNMENT EXPENDITURE GOVERNMENT SUBSIDIES GRACE PERIOD HIGH INTEREST RATE HOUSEHOLDS INDEMNIFICATION INSURANCE CLAIM INSURANCE CLAIMS INSURANCE PREMIUM INTEREST COST INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL FINANCIAL INSTITUTIONS LENDER LENDERS LIABILITY LINE OF CREDIT LIQUID ASSETS LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LOAN LOAN CAPITAL LOAN FACILITY LOAN REPAYMENT LOAN REPAYMENTS LOW INTEREST RATE MARKET DEVELOPMENT MATURITY NATURAL DISASTER NATURAL DISASTERS OPERATING COSTS OPPORTUNITY COST OUTSTANDING DEBT OUTSTANDING LOAN PERPETUITY POLICYHOLDERS POLITICAL ECONOMY PORTFOLIO PUBLIC FINANCES RATE OF RETURN RATES REINSURANCE REINSURANCE PREMIUMS REINSURERS RELATIONSHIP BANKING REPAYMENT REPAYMENT SCHEDULE RESERVE RESERVE FUND RESERVE FUNDS RESERVES RETURN RETURNS RISK CAPITAL RISK MANAGEMENT RISK NEUTRAL RISK PROFILES RISK TRANSFER SAVINGS SECURITIES SHORT-TERM LIQUIDITY SOVEREIGN RISK STOP LOSS REINSURANCE TAX TAX REVENUES |
| spellingShingle |
AGRICULTURAL INSURANCE AMOUNT OF RISK ATTACHMENT POINT BANK POLICY BASIS RISK BORROWING CAPITAL COST CAPITAL MARKET CAPITAL MARKET DEVELOPMENT CASH FLOW CATASTROPHES CATASTROPHIC RISKS CC CLAIM CLAIM PAYMENTS COMMITMENT LOAN CONSUMPTION SMOOTHING CONTINGENT DEBT COST OF CAPITAL CREDIT CONTRACT CREDIT FACILITY CREDIT INSTRUMENTS DEBT DEDUCTIBLE DEVELOPING COUNTRIES DEVELOPING COUNTRY DIRECT CREDIT DIRECT LOANS DISASTERS DISBURSEMENT DISCOUNT RATE DIVERSIFICATION EARTHQUAKE INSURANCE ECONOMICS ELIGIBLE BORROWERS EMERGING MARKET EMERGING MARKET COUNTRIES EXPENDITURE FARMER FINANCIAL ANALYSIS FINANCIAL CAPACITY FINANCIAL CAPITAL FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIATION FINANCIAL PRODUCT FINANCIAL TOOL FISCAL BALANCE FULL REPAYMENT FUTURE CASH FLOWS FUTURE LOAN GLOBAL CAPITAL GLOBAL CAPITAL MARKET GOVERNMENT EXPENDITURE GOVERNMENT SUBSIDIES GRACE PERIOD HIGH INTEREST RATE HOUSEHOLDS INDEMNIFICATION INSURANCE CLAIM INSURANCE CLAIMS INSURANCE PREMIUM INTEREST COST INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL FINANCIAL INSTITUTIONS LENDER LENDERS LIABILITY LINE OF CREDIT LIQUID ASSETS LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LOAN LOAN CAPITAL LOAN FACILITY LOAN REPAYMENT LOAN REPAYMENTS LOW INTEREST RATE MARKET DEVELOPMENT MATURITY NATURAL DISASTER NATURAL DISASTERS OPERATING COSTS OPPORTUNITY COST OUTSTANDING DEBT OUTSTANDING LOAN PERPETUITY POLICYHOLDERS POLITICAL ECONOMY PORTFOLIO PUBLIC FINANCES RATE OF RETURN RATES REINSURANCE REINSURANCE PREMIUMS REINSURERS RELATIONSHIP BANKING REPAYMENT REPAYMENT SCHEDULE RESERVE RESERVE FUND RESERVE FUNDS RESERVES RETURN RETURNS RISK CAPITAL RISK MANAGEMENT RISK NEUTRAL RISK PROFILES RISK TRANSFER SAVINGS SECURITIES SHORT-TERM LIQUIDITY SOVEREIGN RISK STOP LOSS REINSURANCE TAX TAX REVENUES Clarke, Daniel Mahul, Olivier Disaster Risk Financing and Contingent Credit : A Dynamic Analysis |
| geographic_facet |
Latin America & Caribbean Latin America & Caribbean South Asia South Asia The World Region The World Region East Asia and Pacific East Asia and Pacific Central America America Oceania South Asia Asia |
| relation |
Policy Research working paper ; no. WPS 5693 |
| description |
This paper aims to assist policy makers
interested in establishing or strengthening financial
strategies to increase the financial response capacity of
developing country governments in the aftermath of natural
disasters, while protecting their long-term fiscal balance.
Contingent credit is shown to increase the ability of
governments to self-insure by relaxing their short-term
liquidity constraints. In many situations, contingent credit
is most effectively used to facilitate risk retention for
middle layers, with reserves used for bottom layers and risk
transfer (for example, reinsurance) for top layers.
Discussions with governments on the optimal use of
contingent credit instruments as part of a sovereign
catastrophe risk financing strategy can be guided by the
output of a dynamic financial analysis model specifically
developed to allow for the provision of contingent credit,
in addition to reserves and/or reinsurance. This model is
illustrated with three country case studies: agricultural
production risks in India; tropical cyclone risk in Fiji;
and earthquake risk in Costa Rica. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Clarke, Daniel Mahul, Olivier |
| author_facet |
Clarke, Daniel Mahul, Olivier |
| author_sort |
Clarke, Daniel |
| title |
Disaster Risk Financing and Contingent Credit : A Dynamic Analysis |
| title_short |
Disaster Risk Financing and Contingent Credit : A Dynamic Analysis |
| title_full |
Disaster Risk Financing and Contingent Credit : A Dynamic Analysis |
| title_fullStr |
Disaster Risk Financing and Contingent Credit : A Dynamic Analysis |
| title_full_unstemmed |
Disaster Risk Financing and Contingent Credit : A Dynamic Analysis |
| title_sort |
disaster risk financing and contingent credit : a dynamic analysis |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110620100433 http://hdl.handle.net/10986/3457 |
| _version_ |
1764387030670770176 |