Developing and Supporting the Use of Disaster-Linked Financial Instruments: The Role of the IDB in Latin America and the Caribbean

This report was produced by the IDB Working Group on Disaster Risk Financing. The aim of the report is to give a general background on the IDB's disaster financing strategy and also a thorough discussion of regional risk-transfer markets. In addition, a strategy for reducing regional disaster exposures and recommendations are given. The report's main conclusions include: The Executive Board must unambiguously support the move toward proactive risk management practices by instituting consistent policies and making available the necessary internal resources for their implementation; There is a need to establish government risk management offices at the national levels in order to have suitable counterparts for risk management discussions and avoid the moral hazards of unprepared ex-post disaster financing; Bank products and services must encompass all parts of the risk management process; The Bank should promote proactive risk management practices by instituting economic incentives for borrowing members that want to abide by its policy guidelines, and consider risk-adjusted pricing.