Last year more than 83 million people in low and middle income countries were affected by natural disasters. We may not know when or where the next disaster will strike, but we know it will. So why do we still treat disasters like surprises? A new CGD report urges a different approach: make disasters predictable, using the principles and practices of insurance. Hear from four members of the working group in this week's podcast.
CGD Policy Blogs
In Haiti, already the poorest country in the western hemisphere, Hurricane Matthew’s devastation is still being calculated. We know that hundreds of people have died, and the damage to Haiti’s already-fragile infrastructure is immense. So what can people in rich countries do to help? Based on the latest research on humanitarian disaster relief and on the lessons learned in the wake of the 2010 earthquake in Haiti, here are some do’s and some don’ts for policymakers and individuals.
“Cat” bonds are effectively a cheaper source of large-scale insurance coverage against clearly measured risks like earthquakes, storms, or even disease outbreaks. Generally, though, coverage hasn’t trickled down to the poorer and most at-risk countries—precisely those which are most vulnerable when aid fails to arrive or arrives piecemeal. Scaling up this market for lower-income countries would provide better shielding against many risks that undermine development overseas.
When a disaster strikes, we are urged to send money, and many people do—but is there a better way to fund the relief effort? My guests this week, DFID chief economist Stefan Dercon and CGD senior analyst Theo Talbot, believe that insurance can help.
Aid for countries after a disaster is rooted in our best impulses, but the way we provide it urgently needs to be reformed. We spend too little on reducing the costs of future disasters, aid shows up too late, and calls for reform are met with replies of “too bad” because the poorest people bear the greatest costs. But this is a problem that we can fix.
Financing for humanitarian aid is broken. The costs of rapid- (like cyclones) and slow- (like drought) onset disasters are concentrated in poor, vulnerable countries, with a bill to donors of more than $19 billion last year. But far too often, we wait until crises develop before funding the response—what experts at CGD’s recent panel event (recording available at the link) described as a medieval approach of passing around begging bowls and relying on benefactors. The delays make crises worse. And since money shows up, however imperfectly, when things go wrong, it undermines incentives to build resilience, relegating vulnerable people to depending on fickle goodwill.