Disaster safety nets for developing countries: Extending public-private partnerships

In developed countries, public -private partnerships involving insurance companies and governments often provide security against the human and economic losses of disasters. These partnerships, however, are neither available nor affordable in most highly exposed developing countries. In this paper we examine recent innovations in financial risk management that extend traditional public - private partnerships to include NGOs, international financial institutions and other donors. Importantly, these partnerships provide secure financial arrangements to low-income communities before disasters strike and thus relieve the uncertainty and anxiety of depending on ad hoc post-disaster aid for recovery and even survival. We examine three examples of extended partnerships: the Turkish Catastrophe Insurance Pool; the Andhra Pradesh microinsurance program and an index-based weather derivative for farmers facing drought in Malawi.

KEYWORDS: Insurance; microinsurance; disasters; risk; vulnerability

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