Closing the financial gap: Public-private innovations in disaster risk financing

New forms of public-private insurance solutions hold the key to financing disaster risks, says a new Swiss Re report. “Closing the financial gap” features some of our most innovative transactions and shows how governments in different regions have used risk transfer products to prepare for the economic consequences of catastrophic events.

The financial cost of natural disasters has increased five-fold over the past thirty years – from an annual average of USD 25 billion in the 1980s to USD 130 billion in the decade leading up to 2010. Economic development and population growth, a higher concentration of assets in exposed areas and climate change have all contributed to this dramatic increase.

Swiss Re’s new report “Closing the financial gap” shows that both developed and developing countries are affected, although economic losses vary substantially by country and disaster event. A large part of these costs remains uninsured, on average between 60 to 80 percent worldwide.

As the damage from earthquakes, hurricanes, floods, droughts and other catastrophic events continues to rise, governments will face increasing costs for disaster relief and recovery. But innovative risk transfer solutions supported by partners from the public and private sectors offer them alternative sources of funding and new ways to finance disaster risks.

This publication features a selection of cases where governments have already taken steps to secure disaster financing through new and innovative insurance products.

Published 31 January 2011

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