chapter  14
Disaster financing in a developing country context
Pages 15

The frequency and severity of disasters are on the rise, and catastrophic events have been termed one of the hallmarks of the 21st century (Michel-Kerjan 2010). In addition to human and environmental losses, disasters inflict substantial economic costs on societies that must be covered by individuals, private companies or governments. Thus, with the increasing frequency and severity of disasters, a need follows to look at ways of reducing the economic losses. Faced with the risk of disasters, individuals as well as governments essentially have two options for reducing the economic costs: mitigation and/or risk financing. On one hand, disaster mitigation helps prevent or reduce economic losses by reducing the physical vulnerability to hazards. On the other hand, disaster risk financing helps prevent and reduce the losses by reducing the financial vulnerability once the hazards have turned into catastrophic events. As long as catastrophic events cannot be eliminated completely, risk finance arrangements and institutions are needed to reduce societies’ economic vulnerability and increase their resilience.