APEC Finance Ministers are strengthening their disaster risk financing and insurance regimes. They are intent on mitigating the torrent of natural catastrophes putting lives and economies in the Asia-Pacific under increased threat, spotlighted by the recent string of earthquakes and extreme weather here.
Prompted by the flare up in disaster and supply chain vulnerability in the APEC region, finance ministers who convened in Port Moresby this past week are focused on improving financial management of public assets in an emergency—the biggest disaster-related liability for governments.
The initiative covers public assets ranging from post-disaster assistance to roads, ports and airports to hospitals, office buildings and telecoms. The aim is to ensure that resources like these facilitate rapid relief, recovery and resilience across APEC member economies that together account for half of global trade, 60 per cent of world GDP and over 70 per cent of all disasters. Climate change makes this all the more imperative.
“The increasing frequency and intensity of natural disasters is adding to economic and financial risks for our economies,” explained Papua New Guinea’s Deputy Prime Minister and Treasurer Charles Abel, who chaired the APEC Finance Ministers’ Meeting. “The tsunami that hit Sulawesi, reminders of that tragedy during tremors in Bali and Papua New Guinea, and Hurricane Michael in the United States underscore the disaster challenges we face in the region.”
“The joint actions being advanced by APEC Finance Ministers will boost our capacity to mitigate elevated disaster risk levels,” Deputy Prime Minister Abel continued. “Greater progress could both help to save lives and safeguard jobs and growth when it’s needed most.”
Economic losses in APEC economies due to individual disasters over the past ten years have been as high as 16 per cent of GDP and insured losses as high as half of all economic losses. The development of disaster risk financing solutions in APEC is being guided by Japan and the Philippines, in coordination with the OECD and World Bank Group.
Areas of emphasis include enhancing information-sharing and technical exchanges to optimize the application of data, disaster risk and damage assessment, and the deployment of public assets to mitigate natural hazards and climate change.
“Work underway in APEC to narrow gaps in public sector financial risk assessments, which may not capture uncertain, disaster-related liabilities, could further enable aid commitments, infrastructure damage control and continuity in business and trade,” noted Hang Thu Vu of the World Bank’s Disaster Risk Financing and Insurance Program.
Measures under consideration by finance ministers include financial protection strategies incorporating a mix of financial instruments, defined rules for government post-disaster assistance and cost-sharing, and legislative frameworks that allow catastrophe risk insurance of public assets through public-private partnerships.
Finance Ministers are concurrently exploring approaches for improving disaster risk insurance programs to provide an additional layer of financial defense for public assets. They are taking into account ways to raise risk-informed decision making, implementation of insurance schemes and investment in disaster resilience.
“Identifying good practices in assessing, managing and mitigating the financial impact of disasters on state-owned enterprises are important next steps, given potential contingent liabilities that infrastructures and assets under management by these companies may cause to governments,” said Hang.
“Sharing lessons could really guide governments in the APEC region and companies under their auspices to financially manage the disaster risks of infrastructure more effectively,” she concluded.
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