Report No. 94474-pk fiscal Disaster Risk Assessment Options for Consideration

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Report No. 94474-PK

Fiscal Disaster Risk Assessment

Options for Consideration


March 2015

Standard Disclaimer

This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

All Rights Reserved

The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly.

Copyright © 2015 The World Bank / Pakistan

20-A, Shahrah-e-Jumhuriat, G-5/1

Islamabad, Pakistan


Acknowledgements 4

Abbreviations 5

Executive Summary 6

Chapter 1: Introduction 9

Chapter 2: Fiscal Management of Natural Disasters 12

2.1.Emergency Response/Relief Phase 17

2.2.Recovery Phase 18

2.3.Reconstruction Phase 19

Chapter 3: Financial Disaster Risk Assessment 20

2.4.Contingent liability and post-disaster spending needs 20

2.5.Analysis of historical disasters in Pakistan 21

2.6.Statistical fiscal disaster risk analysis 24

2.7.Preliminary earthquake risk profile of Pakistan 28

Chapter 4: Review of the Private Catastrophe Risk Insurance Market 32

2.8.Background 32

2.9.Overview of the market 32

2.10.Private property catastrophe insurance 35

Chapter 5: Options for a National Disaster Risk Financing Strategy 38

2.11.Option 1: Develop a central database for recording disaster losses and expenditures 38

2.12.Option 2: Operationalize the National and Provincial Disaster Management Funds 39

2.13.Option 3: Clarify contingent liability associated with post-disaster cash transfer programs and enhance financing sources behind the programs 41

2.14.Option 4: Develop financial disaster risk assessment tools 43

2.15.Option 5: Develop a national disaster risk financing strategy 44

2.16.Option 6: Establish a robust catastrophe risk insurance program for public assets 46

2.17.Option 7: Promote property catastrophe insurance for private dwellings 47

Annexes 50

Annex 1. Historical Natural Disaster Database for Pakistan 51

Annex 2. World Bank Development Policy Loan with Catastrophe Deferred Drawdown Option 54

2.18.Key Features 55

2.19.Pricing Considerations 55

Annex 3. Mexican Natural Disaster Fund FONDEN 58

2.20.The Fund for Natural Disasters (FONDEN) 58

2.21.Main Features of FONDEN 58

2.22.FONDEN Institutional Structure 59

2.23.FONDEN Program 60

2.24.FONDEN Trust 60

2.25.The FONDEN Disaster Risk Financing Strategy for 2011 61

Annex 4. Turkish Catastrophe Insurance Pool 63

Annex 5. The Post-Disaster Operational Phases 65

Annex 6. Operational Framework for Implementing Disaster Risk Financing and Insurance Solutions 67

2.26.Source of Financing Post-Disaster 75

Annex 7. Examples of World Bank Initiatives to build Financial Resilience to Disasters

(taken from World Bank Disaster Risk Financing and Insurance Program review) 80


The report was developed in partnership between the Disaster Risk Management (DRM) team in the South Asia Region (SAR) and the World Bank Disaster Risk Financing and Insurance (DRFI) Program. It was produced by a team comprised of Marc Forni, Haris Khan, Olivier Mahul, Ben Fox, Rashmin Gunasekera, Emily White, Shiraz Ali Shah and Ahsan Tehsin. The report also benefitted through inputs from Muhammad Waheed, Sarwat Aftab, Mahmood Khalid and Muhammad Ali Khan.

The report greatly benefited through consultations, inputs and guidance received from the Ministry of Finance, the National Disaster Management Authority (NDMA), Securities and Exchange Commission of Pakistan (SECP), the Provincial Disaster Management Authorities and Punjab Finance Department.

The team is grateful to the peer reviewers, Daniel Clarke, Kelly Johnson and Oscar Ishizawa.

The authors would like to thank Rachid Benmessaoud, Bernice K. Van Bronkhorsht, Francis Ghesquiere and Reynold Duncan for their guidance in finalizing this report. The team gratefully acknowledges funding support from the Global Facility for Disaster Reduction and Recovery (GFDRR).

The report is based on data provided by the Federal and Provincial governments for which the authors would like to express their appreciation.



Asian Development Bank


Annual Expected Loss


Azad Jammu and Kashmir


Catastrophe Deferred Drawdown Option


Catastrophe Risk Evaluations and Standardizing Target Accumulations


District Disaster Management Authorities


Damage and Needs Assessment


Disaster Risk Financing and Insurance


Federally Administered Tribal Areas


Global Facility for Disaster Reduction Recovery


Government of Pakistan


Khyber Pakhtunkhwa


Microfinance Institutions


Ministry of Finance


National Database and Registration Authority


National Disaster Management Authority


National Disaster Management Commission


National Disaster Management Fund


National Insurance Company Limited


Provincial Disaster Management Authority


Provincial Disaster Management Fund


Probable Maximum Loss


Pakistan Reinsurance Company Limited


Public Sector Development Program


Securities and Exchange Commission of Pakistan

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