Dealing with Increased Risk of Natural Disasters: Challenges and Options

Author/Editor:

Michael Keen ; Paul K. Freeman ; Muthukumara Mani

Publication Date:

October 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Natural disaster risk is emerging as an increasingly important constraint on economic development and poverty reduction. This paper first sets out the key stylized facts in the area-that the costs of disaster have been increasing, seem set to continue to increase, and bear especially heavily on the poorest. It then reviews the key economic issues at stake, focusing in particular on the actual and prospective roles of, and interaction between, market instruments and public interventions in dealing with disaster risk. Key sources of market failure include the difficulty of risk spreading and, perhaps even more fundamental, the Samaritan's dilemma: the underinvestment in protective measures associated with the rational expectation that others will provide support if disaster occurs. Innovations addressing each of these are discussed.

Series:

Working Paper No. 2003/197

Subject:

Climate change Environment Financial institutions Government debt management Insurance Insurance companies Natural disasters Public financial management (PFM)

English

Publication Date:

October 1, 2003

ISBN/ISSN:

9781451860030/1018-5941

Stock No:

WPIEA1972003

Pages:

38

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