Disasters displace millions and cost billions each year, but still we treat them as surprises, slowing response and costing lives. To tackle this problem, CGD convened a working group of leaders in humanitarian response, insurance and risk finance, and international aid. Jointly led by CGD Europe director and senior fellow Owen Barder and Stefan Dercon of the UK’s Department for International Development (DFID), the group examined how smarter financial instruments can mobilize money quickly and predictably. Its report—Payouts for Perils: How Insurance Can Radically Improve Emergency Aid—proposed two key innovations in how disaster assistance is deployed: existing funding should allow governments and agencies to pre-enroll for rapid support against predictable future costs, and where there is no pool of money, risk should be transferred to the insurance sector through concessional insurance.
The working group’s findings are shaping thinking about disaster response across the development community. In July, DFID announced an initiative to help poor countries prepare for disaster, including through insurance. And in early 2018, the World Bank issued its largest disaster catastrophe bond to date, providing earthquake coverage to Peru, Mexico, Chile, and Colombia.