Financial Mechanisms for Disaster Risk

Authored by: Joanne Linnerooth-Bayer

The Routledge Handbook of Hazards and Disaster Risk Reduction

Print publication date:  December  2011
Online publication date:  March  2012

Print ISBN: 9780415590655
eBook ISBN: 9780203844236
Adobe ISBN: 9781136918698

10.4324/9780203844236.ch54

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Abstract

The human and economic toll from disasters can be greatly amplified by the long-term loss in incomes and health resulting from the inability of communities to restore infrastructure, housing, sanitary conditions and livelihoods in a timely way. Individuals and governments, especially those with limited savings or reserves, high indebtedness and low uptake of insurance, frequently cannot recover from major and recurrent events (Mechler 2003). Informal and formal financial arrangements made before disasters can help to ensure needed post-disaster capital. They can also contribute to development even before disasters strike because they provide the necessary security for households and firms to undertake high-return and high-risk investments. Barnett et al. (2008) have shown that the poor’s ex ante risk management strategies commonly sacrifice expected gains, such as investing in improved seed, to reduce risk of suffering catastrophic loss, a situation perpetuating the ‘poverty trap’.

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