To support the enhancement of disaster risk finance, key policy priorities to be considered by countries in the region include: i) improving regulatory frameworks and institutional capacity, ii) facilitating and broadening DRF policy options, iii) enhancing disaster risk finance education, and iv) strengthening regional co-operation.
The lack of harmonised legislation leads to inconsistent budget execution and unclear accountability. Fragmented and outdated legal and regulatory frameworks limit the use of modern DRF tools. Aligning and co-ordinating DRF legislation with national public financial management systems is crucial to institutionalising DRF instruments. Moreover, modernising disaster and public finance laws, establishing explicit legal mandates for risk-layered tools, and integrating DRF frameworks within national fiscal policy are also important.
In countries of Emerging Asia, DRF responsibilities are often dispersed across multiple agencies at all levels of government. Strengthening institutional co-ordination between national and local governments is therefore essential to ensure efficient and accountable DRF operations and avoid the duplication of roles and responsibilities, as well as lengthy and delayed processes. Updating monitoring, evaluation and data systems is also necessary to strengthen transparency and risk-informed fiscal management, which in turn can increase the ability of governments to allocate resources effectively. Digitising expenditure tracking, and developing interoperable databases that consolidate hazard, exposure, and loss information are needed.
Another important priority is facilitating and broadening DRF policy options. Developing a holistic DRF approach, with an appropriate combination of financing tools, is important to ensure effective disaster preparedness and response in the region. Insurance is one of the most important tools. Although the use of insurance schemes to cover disaster risks has expanded significantly in Emerging Asia in recent years, the disparity between total economic losses and insured losses remains immense. The use of parametric insurance is gradually increasing. Catastrophe bonds offer a potentially useful financing tool but require foundational enabling conditions to be in place, including measurement infrastructure, catastrophe risk models, reliable data quality, specialised expertise, minimised basis risk, and a broader investor base. Monetary and macroeconomic policies, including foreign reserve policy, also serve as important instruments for disaster response in the region. Nevertheless, various factors such as economic conditions, capital market development, and the types and magnitude of disaster-related disruptions need to be considered when determining the appropriate DRF policy mix.
Well-designed DRF mechanisms cannot achieve their objectives unless they are well understood and utilised fully. Improving disaster finance education is therefore crucial. Governments can play an important role in enhancing disaster risk finance education through the education system and targeted programmes. However, disaster risk finance literacy should not only be limited to the school environment. It should also be expanded beyond schools to reach various target groups, including public officers, insurance practitioners, and the public. Moreover, given the geographical and cultural diversity across Emerging Asia, DRF literacy needs to be tailored to specific national contexts and reflect the diverse economic and social structures within each country. Leveraging digital platforms is also vital to significantly expand the reach and accessibility of DRF literacy initiatives.
Finally, countries in the region still have significant potential to strengthen regional co-operation. Various regional initiatives in the frameworks of ASEAN and ASEAN+3 are already in place, including the ASEAN Agreement on Disaster Management and Emergency Response, the ASEAN Disaster Risk Finance and Insurance Roadmap, and the Southeast Asia Disaster Risk Insurance Facility. However, the use of regional financing schemes such as multi-country risk-sharing pools is still limited. Further development and adoption of these mechanisms would facilitate disaster risk mitigation in the region.
