The Macro Financing of Natural Hazards in Developing Countries

The authors propose a financial model to address the design of efficient risk financing strategies against natural disasters at the country level. It is simple enough to shed analytical light on some of the key issues but flexible and realistic enough to provide some quantitative guidance on the ex...

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Main Authors:	Mahul, Olivier, Gurenko, Eugene
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2012
Subjects:	ARBITRAGE ATTACHMENT POINT BALANCE SHEETS BANK LENDING BASIS RISK BONDS BORROWING CAPITAL BASE CAPITAL FLOWS CAPITAL MARKETS CATASTROPHE LOSS CATASTROPHES CATASTROPHIC EVENTS CATASTROPHIC RISKS CONSUMERS COST OF CAPITAL COVERAGE CREDIT FACILITIES CREDIT FACILITY CREDIT RISK DEBT DEVELOPMENT BANKS DISASTER DISASTER RELIEF DISASTER RISK DISASTERS DROUGHT DROUGHTS EARTHQUAKE EARTHQUAKES ECONOMIC GROWTH ECONOMIC RISK FINANCIAL ENGINEERING FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL MARKETS FLOODS HOUSING HURRICANE HURRICANES INDEMNITY INFLATION INFRASTRUCTURE LOANS INSURANCE INSURANCE CLAIMS INSURANCE COMPANIES INSURANCE COVERAGE INSURANCE INDUSTRY INSURANCE MARKETS INSURANCE POOLS INSURED LOSSES INTERNATIONAL FINANCIAL INSTITUTIONS LATIN AMERICAN LIQUIDITY MARKET RISK MIDDLE EAST MITIGATION MITIGATION MEASURES MORAL HAZARD MULTILATERAL DEVELOPMENT BANKS NATURAL CATASTROPHES NATURAL DISASTER NATURAL DISASTERS NATURAL HAZARDS NORTH AFRICA OPERATING COSTS PREMIUMS PRESENT VALUE PROGRAMS RECONSTRUCTION REINSURANCE REINSURANCE COMPANIES REINSURANCE CONTRACTS REINSURERS RESERVES RESOURCE ALLOCATION RISK ASSESSMENT RISK AVERSION RISK MANAGEMENT RISK MANAGEMENT MODEL RISK MITIGATION RISK PREMIUM RISK SHARING RISK TRANSFER SECURITIES SHAREHOLDERS EQUITY STORM STORMS TAXATION UNDERWRITING WESTERN EUROPE
Online Access:	http://documents.worldbank.org/curated/en/2006/12/7245786/macro-financing-natural-hazards-developing-countries http://hdl.handle.net/10986/8860

id	okr-10986-8860
recordtype	oai_dc
spelling	okr-10986-88602021-04-23T14:02:41Z The Macro Financing of Natural Hazards in Developing Countries Mahul, Olivier Gurenko, Eugene ARBITRAGE ATTACHMENT POINT BALANCE SHEETS BANK LENDING BASIS RISK BONDS BORROWING CAPITAL BASE CAPITAL FLOWS CAPITAL MARKETS CATASTROPHE LOSS CATASTROPHES CATASTROPHIC EVENTS CATASTROPHIC RISKS CONSUMERS COST OF CAPITAL COVERAGE CREDIT FACILITIES CREDIT FACILITY CREDIT RISK DEBT DEVELOPMENT BANKS DISASTER DISASTER RELIEF DISASTER RISK DISASTERS DROUGHT DROUGHTS EARTHQUAKE EARTHQUAKES ECONOMIC GROWTH ECONOMIC RISK FINANCIAL ENGINEERING FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL MARKETS FLOODS HOUSING HURRICANE HURRICANES INDEMNITY INFLATION INFRASTRUCTURE LOANS INSURANCE INSURANCE CLAIMS INSURANCE COMPANIES INSURANCE COVERAGE INSURANCE INDUSTRY INSURANCE MARKETS INSURANCE POOLS INSURED LOSSES INTERNATIONAL FINANCIAL INSTITUTIONS LATIN AMERICAN LIQUIDITY MARKET RISK MIDDLE EAST MITIGATION MITIGATION MEASURES MORAL HAZARD MULTILATERAL DEVELOPMENT BANKS NATURAL CATASTROPHES NATURAL DISASTER NATURAL DISASTERS NATURAL HAZARDS NORTH AFRICA OPERATING COSTS PREMIUMS PRESENT VALUE PROGRAMS RECONSTRUCTION REINSURANCE REINSURANCE COMPANIES REINSURANCE CONTRACTS REINSURERS RESERVES RESOURCE ALLOCATION RISK ASSESSMENT RISK AVERSION RISK MANAGEMENT RISK MANAGEMENT MODEL RISK MITIGATION RISK PREMIUM RISK SHARING RISK TRANSFER SECURITIES SHAREHOLDERS EQUITY STORM STORMS TAXATION UNDERWRITING WESTERN EUROPE The authors propose a financial model to address the design of efficient risk financing strategies against natural disasters at the country level. It is simple enough to shed analytical light on some of the key issues but flexible and realistic enough to provide some quantitative guidance on the ex ante financing of catastrophic losses. The risk financing problem is decomposed into two steps. First, the resource gap, defined as the difference between losses and available ex-post resources (such as post-disaster aid), is identified. It determines the losses to be financed by ex ante financial instruments (reserves, catastrophe insurance, and contingent debt). Second, the cost-minimizing financial arrangements are derived from the marginal costs of the financial instruments. The model is solved through a series of graphical analyses that make this complex financial problem easier to apprehend. This model captures and explains the main impacts of financial parameters (such as insurance premium, cost of capital) on efficient risk financing structures. 2012-06-22T20:16:03Z 2012-06-22T20:16:03Z 2006-12 http://documents.worldbank.org/curated/en/2006/12/7245786/macro-financing-natural-hazards-developing-countries http://hdl.handle.net/10986/8860 English en_US Policy Research Working Paper; No. 4075 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ARBITRAGE ATTACHMENT POINT BALANCE SHEETS BANK LENDING BASIS RISK BONDS BORROWING CAPITAL BASE CAPITAL FLOWS CAPITAL MARKETS CATASTROPHE LOSS CATASTROPHES CATASTROPHIC EVENTS CATASTROPHIC RISKS CONSUMERS COST OF CAPITAL COVERAGE CREDIT FACILITIES CREDIT FACILITY CREDIT RISK DEBT DEVELOPMENT BANKS DISASTER DISASTER RELIEF DISASTER RISK DISASTERS DROUGHT DROUGHTS EARTHQUAKE EARTHQUAKES ECONOMIC GROWTH ECONOMIC RISK FINANCIAL ENGINEERING FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL MARKETS FLOODS HOUSING HURRICANE HURRICANES INDEMNITY INFLATION INFRASTRUCTURE LOANS INSURANCE INSURANCE CLAIMS INSURANCE COMPANIES INSURANCE COVERAGE INSURANCE INDUSTRY INSURANCE MARKETS INSURANCE POOLS INSURED LOSSES INTERNATIONAL FINANCIAL INSTITUTIONS LATIN AMERICAN LIQUIDITY MARKET RISK MIDDLE EAST MITIGATION MITIGATION MEASURES MORAL HAZARD MULTILATERAL DEVELOPMENT BANKS NATURAL CATASTROPHES NATURAL DISASTER NATURAL DISASTERS NATURAL HAZARDS NORTH AFRICA OPERATING COSTS PREMIUMS PRESENT VALUE PROGRAMS RECONSTRUCTION REINSURANCE REINSURANCE COMPANIES REINSURANCE CONTRACTS REINSURERS RESERVES RESOURCE ALLOCATION RISK ASSESSMENT RISK AVERSION RISK MANAGEMENT RISK MANAGEMENT MODEL RISK MITIGATION RISK PREMIUM RISK SHARING RISK TRANSFER SECURITIES SHAREHOLDERS EQUITY STORM STORMS TAXATION UNDERWRITING WESTERN EUROPE
spellingShingle	ARBITRAGE ATTACHMENT POINT BALANCE SHEETS BANK LENDING BASIS RISK BONDS BORROWING CAPITAL BASE CAPITAL FLOWS CAPITAL MARKETS CATASTROPHE LOSS CATASTROPHES CATASTROPHIC EVENTS CATASTROPHIC RISKS CONSUMERS COST OF CAPITAL COVERAGE CREDIT FACILITIES CREDIT FACILITY CREDIT RISK DEBT DEVELOPMENT BANKS DISASTER DISASTER RELIEF DISASTER RISK DISASTERS DROUGHT DROUGHTS EARTHQUAKE EARTHQUAKES ECONOMIC GROWTH ECONOMIC RISK FINANCIAL ENGINEERING FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL MARKETS FLOODS HOUSING HURRICANE HURRICANES INDEMNITY INFLATION INFRASTRUCTURE LOANS INSURANCE INSURANCE CLAIMS INSURANCE COMPANIES INSURANCE COVERAGE INSURANCE INDUSTRY INSURANCE MARKETS INSURANCE POOLS INSURED LOSSES INTERNATIONAL FINANCIAL INSTITUTIONS LATIN AMERICAN LIQUIDITY MARKET RISK MIDDLE EAST MITIGATION MITIGATION MEASURES MORAL HAZARD MULTILATERAL DEVELOPMENT BANKS NATURAL CATASTROPHES NATURAL DISASTER NATURAL DISASTERS NATURAL HAZARDS NORTH AFRICA OPERATING COSTS PREMIUMS PRESENT VALUE PROGRAMS RECONSTRUCTION REINSURANCE REINSURANCE COMPANIES REINSURANCE CONTRACTS REINSURERS RESERVES RESOURCE ALLOCATION RISK ASSESSMENT RISK AVERSION RISK MANAGEMENT RISK MANAGEMENT MODEL RISK MITIGATION RISK PREMIUM RISK SHARING RISK TRANSFER SECURITIES SHAREHOLDERS EQUITY STORM STORMS TAXATION UNDERWRITING WESTERN EUROPE Mahul, Olivier Gurenko, Eugene The Macro Financing of Natural Hazards in Developing Countries
relation	Policy Research Working Paper; No. 4075
description	The authors propose a financial model to address the design of efficient risk financing strategies against natural disasters at the country level. It is simple enough to shed analytical light on some of the key issues but flexible and realistic enough to provide some quantitative guidance on the ex ante financing of catastrophic losses. The risk financing problem is decomposed into two steps. First, the resource gap, defined as the difference between losses and available ex-post resources (such as post-disaster aid), is identified. It determines the losses to be financed by ex ante financial instruments (reserves, catastrophe insurance, and contingent debt). Second, the cost-minimizing financial arrangements are derived from the marginal costs of the financial instruments. The model is solved through a series of graphical analyses that make this complex financial problem easier to apprehend. This model captures and explains the main impacts of financial parameters (such as insurance premium, cost of capital) on efficient risk financing structures.
format	Publications & Research :: Policy Research Working Paper
author	Mahul, Olivier Gurenko, Eugene
author_facet	Mahul, Olivier Gurenko, Eugene
author_sort	Mahul, Olivier
title	The Macro Financing of Natural Hazards in Developing Countries
title_short	The Macro Financing of Natural Hazards in Developing Countries
title_full	The Macro Financing of Natural Hazards in Developing Countries
title_fullStr	The Macro Financing of Natural Hazards in Developing Countries
title_full_unstemmed	The Macro Financing of Natural Hazards in Developing Countries
title_sort	macro financing of natural hazards in developing countries
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2006/12/7245786/macro-financing-natural-hazards-developing-countries http://hdl.handle.net/10986/8860
_version_	1764406668570918912

The Macro Financing of Natural Hazards in Developing Countries

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