2. Executive summary
There is global recognition of the devastating impacts of natural disasters on lives, livelihoods and property. This, in turn, is undermining the overarching goal of economic, social and environmental sustainability—in other words, sustainable development. There is a need to embrace long-term strategies and approaches that build disaster resilience. The aim is to prevent, as much as possible, natural hazard events from becoming disasters that wipe out many years of hard-won development gains.
Governments are increasingly burdened by the fiscal, economic and social cost of natural disasters. From a community perspective, disaster resilience plays a critical role in saving lives and protecting livelihoods and property.
It is clear that one of the best ways forward is to harness the capabilities and strengths of all stakeholders—governments, non-governmental organisations (NGOs), communities and businesses—to develop and implement disaster resilience activities. The growing focus on disaster risk reduction and climate change adaptation can benefit from multi-stakeholder partnerships involving the insurance industry and the broader business community. In recent years, insurers have been active in establishing partnerships that connect stakeholders with governments to foster collaborative approaches towards disaster resilience.
Multi-stakeholder partnerships leverage the expertise and resources of government, businesses and NGOs and have a proven track record in managing risks and unlocking opportunities to address the growing need for investments in disaster resilience. These partnerships have been particularly helpful in providing governments and communities with insights on effective behavioural, ecosystem and structural measures to reduce disaster risk.
Partnerships on resilience-building activities are diverse, including how they take into account localised political, socio-cultural and economic circumstances. This breadth of activity highlights that disaster risk reduction and adaptation approaches usually require tailored activities and partnerships that meet the needs of a specific community, country or region. Certain initiatives highlight the importance of using data and research, including cost-benefit analysis, to formulate sound fiscal and economic perspectives, which underscore the value of upfront investments in disaster risk reduction.
Beyond understanding and reducing risk, the insurance industry plays the key role of carrying financial risk efficiently across the individual, national and international levels. Financial risk transfer instruments such as insurance provide protection by absorbing shocks that would otherwise be borne by households, businesses and governments.
Furthermore, physical risk reduction measures and financial risk transfer instruments are mutually reinforcing and are both important to achieving integrated disaster risk management. Insurance provides risk insights and incentives (e.g. risk and loss data, risk analysis and quantification, risk underwriting and pricing), which contribute to a better understanding of risk and more effective risk reduction measures.
Closing both the disaster risk reduction gap and the insurance protection gap is imperative to protecting development gains and to shaping disaster-resilient development pathways. In this context, UN global policy frameworks on disaster risk reduction, climate change and sustainable development culminating in 2015 offer an unprecedented opportunity for collaboration. These global frameworks are opportunities for the insurance industry to work together with governments and other key stakeholders in building disaster-resilient communities and economies, and in promoting sustainable development.