Opening Statement at Innovative Financing For Disaster Risk Reduction In Asia-Pacific
Delivered at Innovative Financing For Disaster Risk Reduction In Asia-Pacific in United Nations Headquaters, New York
H.E. Sukhbold Sukhee, Ambassador and Permanent Representative of Mongolia to the UN
Permanent Representatives to the UN,
Ladies and gentlemen,
A warm welcome.
Long has Asia-Pacific region borne the brunt of the world’s natural disasters - around $1.3 trillion in assets lost over the past half century. By 2030 we estimate the annual loss could reach US$ 160 billion or 0.6% of the region’s GDP. Of even further concern is that only 8% of these losses are insured.
I would like to express my appreciation to Mongolia for co-organizing this event. I also extend my thanks to all our panellists.
Disaster risk is outpacing resilience. Our Asia-Pacific Disaster Report 2017 provides extensive evidence of how people and critical assets are becoming more and more vulnerable.
‘Business as usual’ is unsustainable.
Asia-Pacific’s large protection gap however offers a ‘business’ opportunity.
I highlight three opportunities elaborated in ESCAP reports.
First, innovations underway hold promise for a major breakthrough in the management of natural catastrophe risk.
The development and mainstreaming of catastrophe risk modelling has brought together science, engineering and computer modelling to change the way that natural disaster risk is managed and priced. The creation and deployment of parametric insurance instruments, for example, has enabled payouts to be triggered based on objective parameters, that have benefited people where indemnity-based products have not gained sufficient traction. Furthermore, the convergence of traditional and global financial reinsurance has made it possible to transfer large volumes of hazard risk to global markets in a cost-effective manner with lower frictional costs and arguably less uncertainty about future pricing and capacity. Lastly, a relatively new concept of concessional insurance, as a subset of broader concessional financing delivered by multilateral development agencies and other development actors, will also help diversify risk financing tools and products.
Second, successful sovereign risk pools have helped improve risk assessments and the development of coordinated and pre-agreed disaster plans.
Sovereign risk pools in the Caribbean, Africa and the Pacific have helped governments safeguard national budgets and protect the lives of their citizens. However, risk pooling and related meso and micro level financing have often faced challenges in scaling up, as the volume of risk transfers as well as country participation has been highly uneven.
Third, regional cooperation facilitated by ESCAP can help expand disaster risk financing across the Asia-Pacific.
The existing multi-national risk pools in operation, need to be backed up by technical expertise which resides in a private sector vehicle, complemented by regional cooperative arrangments that are able to pool the demand of countries together and present the economic case for risk financing, in an accessible way. On the supply side, the provision of sovereign risk insurance is relatively well tested. Rather the key challenge is on the demand side – how to create demand by enhancing understanding and tailoring products that fit regional and country contexts. The provision of a regional platform for building capacity as well as mutual trust among countries is the key to successful sovereign risk pooling. Towards this end, ESCAP, whose primary mandate is regional cooperation, and with its established track record of delivering knowledge products and capacity-development, is well suited for this role.
Since 2005, ESCAP has managed a Multi-Donor Trust Fund for Tsunami, Disaster and Climate Preparedness set up by Thailand with a US$ 10 million dollar contribution. Sweden followed, and later Bangladesh, Germany, India, Japan, Nepal, the Philippines and Turkey.
Since 2005, the Trust Fund has been an effective vehicle for sharing data, tools and expertise in support of people-centred early warning systems, as a regional public good.
The Fund is depleting rapidly however. Additional contributions to the Trust Fund could initiate the momentum needed to scale up disaster risk financing. Besides the technical assistance, provision of knowledge products and services that the Fund has always provided, the Fund could also be adapted to provide a complementary window that provides seed grant financing to support risk transfer vehicles, including pooling. Such a blending of traditional, and innovative financing, could bolster each other. This is important because traditional donors have struggled to keep up with the growing needs, notwithstanding their gradual increases in financial assistance for DRR and climate change.
To conclude, the time for establishing solutions to the challenges of emerging complex risks, is now. Policy makers and developmental and financial strategists in both the public and private sectors will need to work together. In this regard, I am particularly pleased to see key private sector players well represented today. I hope that today’s discussion in disaster risk financing is a seminal step towards concrete actions.