ASEANDISASTERRISKFINANCING &INSURANCEFORUM

ASEANDISASTERRISKFINANCING&INSURANCEFORUM
Session3

NaturalDisastersinASEANCountries: Natural Disasters in ASEAN Countries: AssessmentofEconomic&FiscalImpactsand theirManagement th i M t

OlivierMahul ProgramCoordinator,DisasterRiskFinancing&Insurance,TheWorldBank November8 10,2011 Jakarta,Indonesia

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Disclaimer
Thisreportisaworkinprogresspresentedforfurther collaborativedrafting.Theteamhasmadeeveryattemptto verifythecontentspresented,buttheinformationshouldbe verify the contents presented but the information should be interpretedwithdueconsiderationtoitslimitationsresulting fromthefactthatindirectsourceshavebeenusedwhere primarysourceswerenotavailable,andthatthecollective i il bl d h h ll i knowledgeinthisareaislimited. Thecurrentdraftwillbecompleted/revisedinthelightofthe The current draft will be completed/revised in the light of the discussionwiththeASEANMemberStatesandother participantsduringthisForum.

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Presentationbackground&structure
W ld B k d ASEAN S WorldBankandASEANSecretariatbackground i b k d reportonthestateofdisasterriskfinancingand insuranceinASEANCountries; insurance in ASEAN Countries; PreliminaryfindingsfromFirstDraftreport; Session #3 covers ASEAN Regions: Session#3coversASEANRegion s:
Vulnerabilitytonaturaldisasters; Progressindisasterriskmanagement; Progress in disaster risk management; Economiclossesfromnaturaldisasters; Fiscalvulnerabilitytonaturaldisasters; Fiscalriskmanagementofnaturaldisasters.

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ASEANregionhighlyexposedtoalmostalltypesof naturalhazards
Historyofdevastatingdisasters Economicandfiscalvulnerability y tonaturaldisastersisincreasing
unprecedentedurbanizationand populationmigration population migration rapideconomicgrowth, Climatechange
ASEAN Mortality Risk Index for MultiHazard Risk

Largepopulationlivinginareasat highriskofperiodicflooding

Source:ASEANDRMI2010

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Stormsandfloodsarethemostprevalenthazardsand causethemostcasualties

Mostvulnerableareas:MekongRiverDeltaregion,Vietnam;Allregions,Philippines; Most vulnerable areas: Mekong River Delta region Vietnam; All regions Philippines; Almostallregions,Cambodia;NorthandEastLaoPDR;Bangkokregion,Thailand;West andsouthofSumatra,andwesternandeasternJava,Indonesia.

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Significantvariationwithinregiononimplementationof disasterriskmanagement(DRM)strategies
HyogoFrameworkforAction(HFA)implementationprogresshighlyvariable bothbetweencountriesandeachHFApriority. both between countries and each HFA priority
HFAcompliance
Implementationprogres s: 2=s omeprogress withouts ystematicpolicyand/orins titutional commitment 3=institutionalcommitmentattainedbutachievements areneithercomprehensivenor 4=s ubstantial a chieveda ttainedbutwithrecognizedlimitationsincapacitiesand

HFAPriority#1 HFAPriority#2 HFAPriority#3 HFAPriority#4 HFAPriority#5 BruneiDarussalam Indonesia LaoPDR Malaysia Myanmar Philippines Thailand Vietnam
3 4 2 4 3 4 4 4 3 4 4 4 2 4 3 3 2 3 3 4 2 3 4 3 2 4 3 4 2 3 3 3 3 3 3 4 2 4 4 4

HFAPriority#1:Ensurethatdisaster riskreductionisanationalandalocal prioritywithastronginstitutional basisforimplementation b i f i l t ti HFAPriority#2:Identify,assessand monitordisasterrisksandenhance earlywarning HFAPriority#3:Useknowledge, innovationandeducationtobuilda innovation and education to build a cultureofsafetyandresilienceatall levels HFAPriority#4:Reducethe underlyingriskfactors HFAPriority#5:Strengthendisaster preparednessforeffectiveresponseat alllevels

Note:CambodiaandSingaporenotincludedinthisreview.

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ChallengestomainstreamingDRMinASEANcountries remain
LimitedinstitutionalizationofDRMasapriorityatthenational andsubnationallevels Developmentanduseofriskassessmenttoolsand methodologiestosupportdisasterriskreduction(DRR) activitiesremainlimited activities remain limited Crosssectorandcrossjurisdictionalcoordinationrequire strengthening Difficultytosustainawarenessonlowfrequencydisasterrisk andtoexpandpublicknowledgebeyondhighriskareasthat facerecurrentevents face recurrent events

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MethodologyforassessingdisasterlossesinASEAN
Combinationofhistoricalandsimulateddisaster economiclosses HistoricaldatafromEMDATCRED
Highfrequencylowimpactdisasters Localizeddroughtsandfloods,smallstorms

Probabilisticcatastropheriskmodels
Low frequency high impact disasters Lowfrequencyhighimpactdisasters Largeearthquakesand/orstorms SimulatedlossdataprovidedbyWillisResearchNetwork p y

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Eachyear,onaverage,ASEANregionexperiences annualexpectedlossescausedbynaturaldisasters p y estimatedatUS$4.6billion,or0.26%ofregionalGDP

1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

AnnualexpectedlossforASEANbyperil Annual expected loss for ASEAN by peril

Drought

US S$Millions

5% 32% 22% 0% 0% 1% 0% 30%

Flood Forestfire Massmovement dry Massmovement wet Volcano Wildfire Earthquakes Storms

10%

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AspercentageofnationalGDP,Myanmar,Philippines, Vietnam,LaoPDR,andCambodiamostaffectedby annualexpectedlosses

2.0 1.8 1.6 1.4 %ofGDP 1.2 1.0
0.80% 1.83%

0.8 0.6 0.4 0.2 0.0

0.76%

0.70%

0.65%

0.26%

0.18% 0.08% 0.07% 0.00% 0.00%

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Onceevery100years,onaverage,theASEANregionisestimated tofaceannualdisasterlossesinexcessofUS$19billion
100yearand200yearprobablemaximumlossinUS$Millions
25,000 20,000 US S$Millions 15,000 10,000 , 5,000 0 PML(100yrs) PML(200yrs) % %ofGDP

100yearand200yearprobablemaximumloss,as%ofnationalGDP
14.0 14 0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 7.3 4.7 3.6 1.4 1.1 1.0 0.7 0.0 11.7 PML(100yrs) PML(200yrs)

Note:Myanmarexcludedduetodatalimitations.

AspercentageofnationalGDP, p probablemaximumlossvaries significantlyacrosscountries

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ASEANRegioncanbenefitfromregionalrisk diversification
IndicativeCountryRiskProfiles
18% 16%

Estimatedbenefitsofrisk diversification
60,000 50,000 200y yearPMLs(USDmil llions)
Cambodia Indonesia LaoPDR Malaysia Philippines

14% 12%

40,000 40 000 30,000 20,000 10,000

%ofGDP

10% 8% 6% 4% 2% 0% 0 50 100 150 200 250 300 350 400 450 500

Reductionin PML=56%

Singapore g p Thailand Vietnam

ReturnPeriod(Years)

Sumofindividualcountry 200yearPMLs

200yearPMLforpoolof countries

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Governmentsonlyassumefinancialresponsibilityfor partoftotaleconomiclossesfromnaturaldisasters part of total economic losses from natural disasters

Governmentcontingentliabilitydeterminedby:
Moralandsocialduties; Equityconcerns; E it Rolesasproviderofpublicgoodsandstimulatorsofeconomicgrowth. Lackofclarityonofficialformsandlevelsofpostdisastergovernment L k f l it ffi i l f dl l f t di t t supportandadhocdecisionmakingmakeitextremelydifficulttocalculate publiccontingentliabilityfromanexanteperspective,basedonexpected governmentbehavior.

Inpractice,governmentcontingentliabilityisdifficulttoassess

Contingentliabilitycanbeapproximatedbyapplyingobservedratiosof g p y p g damagetoidentifiedpublicsectorrecoveryandreconstructionspending requirementsfollowingrecentdisasterstoaverageexpectedeconomicloss andprobablemaximumlossdata.

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Annualexpectedfiscalburdenofdisastersisestimated toexceed0.5%oftotalgovernmentexpendituresinfive g p ASEANCountries

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Probablefiscalburdenrelativetoannualgovernment expenditurefor1 in 200yeardisastereventsis expenditure for 1in200 year disaster events is particularlyhighinLaoPDR,Philippines,andCambodia

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ASEANCountriescurrentlyretainmostoftheir sovereigndisasterrisk
Relativelylittlepublicuseofrisktransferinstruments Heavyrelianceonannualdisasterbudgetallocationsandde y g factopostdisasterreallocations Verylimiteduseoftaxinstrumentstoraisedisasterresponse financing,buttaxcutstostimulateeconomicrecoveryare fi i b tt t t ti l t i common SomeASEANstateshavesecuredexantecontingentcreditfor g disasterresponsepurposes,facilitatingrapidaccesstoliquidity postdisaster N ASEAN NoASEANcountrieshavesetupdedicatedmultiyearreserve ti h t d di t d lti fundstofinancethecostofnaturaldisasters

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Preliminarysummaryoffiscalriskmanagement arrangementsinASEANCountries arrangements in ASEAN Countries

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ASEANCountriesdonotseemshaveadequate financingarrangementsinplacetomanageamajor disasterevent

Availableevidencesuggeststhathumanitarianreliefneedsare largelymet,butlowerincomecountriesregularlystruggleto largely met but lower income countries regularly struggle to secureadequate,timelyfundingforearlyrecoveryand,in particular,reconstruction Disbursementofavailablefundingcanberelativelyslow Fundinggapsmaybefeltparticularlyacutelyatalocallevel Postdisasterresponsespendingisnotsystematicallytrackedin anycountry,hinderingeffortstomanageavailablefunding y, yg p , g y effectively,toidentifygaps,andtoensurestrongaccountability BUTsomeASEANcountriesareworkingonanintegrated disasterriskfinancingstrategy