Swiss Re advocates new forms of public-private disaster risk financing

New forms of public-private partnerships can help governments worldwide cope financially with the increasing damage costs of natural catastrophes, according to a new report by Swiss Re. “While governments, development banks or NGOs are constantly getting better at managing disasters more actively, they are finding it more and more difficult to address the financial implications of large-scale natural disasters,” the report says.”New forms of public-private partnerships allow them to leverage their funds through the use of insurance and capital market instruments,” adds Michel Lis, member of Swiss Re’s executive committee.The report, entitled “Disaster risk financing: reducing the burden on public budgets,” notes a total of 335 natural catastrophes in 2007 led to overall economic losses of US$64 billion across the globe, of which US$40 billion were uninsured. Individuals, companies and the public sector carry these losses, Swiss Re notes. But recent risk transfer solutions offer governments, development banks and relief organizations models to access pre-event financing, enabling the allocation of relief funds more efficiently by using insurance and capital market instruments.”Risk avoidance and mitigation strategies must be the first priority in managing natural disasters,” Reto Schnarwiler, head of Swiss Re’s public sector business development, said in the release. “However, no organization or country can fully insulate itself against extreme events. “Transferring catastrophic risk therefore has to be a key element in the financial strategy of every disaster-prone country or region in order to enable and sustain growth.”