B. Post-Disaster Financing


Disaster risk financing can be distinguished between pre-disaster and post-disaster financing (see DRF definition in Phase 2.A Pre-Disaster Financing).

Brief Description

DRF strategies for governments look at contingent liabilities or potential assets that are vulnerable to extreme weather events. The strategies combine different financial instruments to protect against possible losses of different frequency and severity to reduce the budget shock caused by extreme weather events. According to EU/UNDP/WB/GFDRR (2015), it is useful to divide the budget into emergency funding (response) and reconstruction financing (resilient recovery) for disbursing funds rapidly and coordinating resources.

When countries lack the financial capacity to respond immediately and effectively to an extreme weather event, the adverse implications increase rapidly. Long-term development prospects suffer as the government diverts public funding from social and economic development programmes to fill the recovery gaps. Resilient reconstruction may be delayed or not take place at all due to a lack of resources.

Involved Actors

In addition to the institutions involved in pre-disaster financing, after the extreme weather event the prime responsible actors are the selected response and recovery ‘lead agency’, in coordination with the MoA and related ministries (e.g. infrastructure, rural development). They closely interact with international organizations and humanitarian aid institutions, and coordinate with the civil society, private sector and affected communities.


Insurance complements post-disaster financing mechanisms

Neither DRF nor insurance are sufficient ‘stand-alone’ mechanisms. A three-layered approach combines pre-disaster financing, post-disaster financing and insurance products

Reducing ad hoc budget restructuring

Index products provide quick payouts for response and recovery and reduce ad hoc restructuring of budgets that hamper long-term development prospects.