Improving the Assessment of Disaster Risks to Strengthen Financial Resilience

 

Remarks by Angel Gurría, OECD Secretary-General, delivered at a side event to the G20 Leaders Summit

Los Cabos, Mexico, Saturday 16th June 2012

Minister Meade, dear Jose Antonio,
Minister Echeverry,
President Zoellick, dear Robert,
[Deputy] Vice-Minister Ishii, 
Ladies and Gentlemen,

I welcome the G20 Mexican Presidency initiative on disaster risk management. Given the systemic dimension and country spill-overs in certain catastrophic risks, the G20 is well suited to play an important role through the exchange of best practices and experiences to address events that, according to our analysis, cost the world economy nearly $350 billion last year.

So  it is most welcome and timely that the G20, by the initiative of the Mexican Presidency, decided to address these issues with two major deliverables: a comprehensive publication released today and a methodological framework to be developed for the G20 Finance meeting this November.

I would like to congratulate the government of Mexico and the World Bank for this impressive joint publication. We were very pleased to contribute a section on policy options for disaster risk financing as well as loss and exposure quantification issues based on long standing OECD policy work. OECD has developed and mobilized significant expertise over the past decade to help governments in the field of disaster risk assessment and financing, including through peer review. We issued a set of Recommendations on Good practices for mitigating and financing catastrophic risks.

Based on OECD experiences, we suggest various options for governmental initiatives including the establishment of dedicated disaster funds, insurance and reinsurance programs, dedicated lending facilities or guarantees, and alternative risk transfer and risk financing tools, as well as improved implementation. Of course, strategies should be adapted to each particular country situation. For example, we are currently reviewing Mexico’s civil protection system taking into account its specific needs. This is also an opportunity to illustrate the fundamental importance of risk assessment as the foundation for efficient and effective prevention, preparation, response and recovery from earthquakes, floods and hurricanes.

From a policy perspective, governments will be in a better position if they establish, preferably ex-ante, effective risk transfer and financing tools as part of a broader DRM framework and a good understanding, through risk assessment, of the potential direct and indirect effects of major disaster events on the economy in the short and long term.

Therefore, upon the request of the G20, we are developing a methodological framework, with the support from the World Bank, United Nations and other stakeholders that is intended to enhance disaster risk assessment and the development of sound risk financing strategies through tools demonstrating the interconnectivity of risks and prioritizing expenditures on prevention, mitigation, preparedness and financial compensation. The framework will emphasize the need of a “whole-of-government” approach to risk assessment based on improved access to data amongst countries to enable hazard and vulnerability analysis through measurement and quantification of past direct and indirect disaster losses, as well as of evolving hazards and risk exposures (on assets, populations and economic activity).

While addressed primarily to governments, many experts from the private sector and academia have agreed to cooperate actively to this framework, which creates a broader culture of safety and resilience. By leveraging our combined experience, this initiative will build upon advances already made at the international level with instruments such as the Hyogo Framework for Action.

Work is well underway and will be delivered to the G20 in November. I am confident that this framework will further enhance our ability to meet the future challenges posed by extreme risks. We all know that this is only a first step. Over time, we will need to enrich this framework in order to make it as useful, implementable and dynamic as possible.


Together, we can design, promote and implement better risk management policies for better lives.
Thank you.

 

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