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:
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
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