R. Mechler

Flood risk and climate change: global and regional perspectives

Abstract A holistic perspective on changing rainfall-driven flood risk is provided for the late 20th and early 21st centuries. Economic losses from floods have greatly increased, principally driven by the expanding exposure of assets at risk. It has not been possible to attribute rain-generated peak streamflow trends to anthropogenic climate change over the past several decades. Projected increases in the frequency and intensity of heavy rainfall, based on climate models, should contribute to increases in precipitation-generated local flooding (e.g. flash flooding and urban flooding). This article assesses the literature included in the IPCC SREX report and new literature published since, and includes an assessment of changes in flood risk in seven of the regions considered in the recent IPCC SREX report—Africa, Asia, Central and South America, Europe, North America, Oceania and Polar regions. Also considering newer publications, this article is consistent with the recent IPCC SREX assessment finding that the impacts of climate change on flood characteristics are highly sensitive to the detailed nature of those changes and that presently we have only low confidence1 in numerical projections of changes in flood magnitude or frequency resulting from climate change. Editor D. Koutsoyiannis Citation Kundzewicz, Z.W., et al., 2013. Flood risk and climate change: global and regional perspectives. Hydrological Sciences Journal, 59 (1), 1–28.

Insurance for assisting adaptation to climate change in developing countries: a proposed strategy

Abstract This paper suggests a two-tiered climate insurance strategy that would support developing country adaptation to the risks of climate variability and meet the intent of Article 4.8 of the United Nations Framework Convention on Climate Change (UNFCCC). The core of this strategy is the establishment of a climate insurance programme specialized in supporting developing country insurance-related initiatives for sudden- and slow-onset weatherrelated disasters. This programme could take many institutional forms, including an independent facility, a facility in partnership with other institutions of the donor community, or as part of a multi-purpose disaster management facility operated outside of the climate regime. Its main purpose would be to enable the establishment of public—private safety nets for climate-related shocks by assisting the development of (sometimes novel) insurance-related instruments that are affordable to the poor and coupled with actions and incentives for pro-active preventive measures. A second tier could provide disaster relief contingent on countries making credible efforts to manage their risks. Since it would be based on precedents of donor-supported insurance systems in developing countries, a main advantage of this proposed climate insurance strategy is its demonstrated feasibility. Other advantages include its potential for linking with related donor initiatives, providing incentives for loss reduction and targeting the most vulnerable. Many details and issues are left unresolved, and it is hoped that this suggested strategy will facilitate needed discussion on practical options for supporting adaptation to climate change in developing countries.

Understanding trends and projections of disaster losses and climate change: is vulnerability the missing link?

The recent IPCC-SREX report demonstrated for the first time comprehensively that anthropogenic climate change is modifying weather and climate extremes. The report also documents, what has been long known, that losses from natural disasters, including those linked to weather, have increased strongly over the last decades. Responding to the debate regarding a contribution of anthropogenic climate change to the increased burden from weather-related disasters, the IPCC-SREX finds that such a link cannot be made today, and identifies the key driver behind increases in losses as exposure changes in terms of rising population and capital at risk. Yet, in the presence of many uncertainties and omissions involved in studying trends in losses, the authors of the IPCC report did not exclude a role for climate change. In particular, one key uncertainty identified has been the incomplete consideration of economic vulnerability to natural hazards, defined as the propensity to incur losses in a hazardous event. Focussing on the role of vulnerability in determining today’s and future disaster loss risk, we critically review the literature on loss trends and projections, and provide context by way of a modeling case study of observed and projected losses from riverine flooding in Bangladesh. We find that research has almost exclusively focused on normalizing losses for changes in exposure, yet not for vulnerability, which appears a major gap given the dynamic nature of vulnerability, and documented evidence regarding decreases in vulnerability in many regions. One such region is South Asia, and of particular interest to us is Bangladesh, a country heavily at-risk, but also with substantial expertise regarding risk management, where we are able to show that economic vulnerability has been substantially reduced over the last decades. In order to understand future flood risk in Bangladesh, we project risk based on past reductions in vulnerability and compare it to a case where vulnerability is not considered explicitly and kept static. In the dynamic scenario, risk would still increase in absolute terms, yet at much smaller increments compared to a static vulnerability case. Thus, a key finding of our analysis is that, absent dynamic quantifications of vulnerability, studies on future losses under climatic change may overestimate future losses. Furthermore, the analysis also suggests that there are substantial benefits to gain by supporting vulnerability-reducing measures in many regions. Finally, we emphasize the need for further taking a risk-based perspective on modelling climate impacts in order to provide robust information on the costs and impacts from extremes in a changing climate.

Sovereign financial disaster risk management: The case of Mexico

Abstract In 2006, Mexico became the first transition country to transfer part of its public-sector natural catastrophe risk to the international reinsurance and capital markets. The Mexican case is of considerable interest to highly exposed transition and developing countries, many of which are considering similar transactions. Risk financing instruments can assure governments of sufficient post-disaster capital to provide emergency response, disaster relief to the affected population and repair public infrastructure. The costs of financial instruments, however, can greatly exceed expected losses, and for this reason it is important to closely examine their benefits and alternatives. This paper analyzes the Mexican case from the perspective of the risk cedent (the Ministry of Finance and Public Credit), which was informed by analyses provided by the International Institute for Applied Systems Analysis (IIASA). The rationale for a government to insure its contingent liabilities is presented along with the fiscal, legal and institutional context of the Mexican transaction. Using publicly available data, the paper scrutinizes the choice the authorities faced between two different risk-transfer instruments: reinsurance and a catastrophe bond. Making use of IIASAs catastrophe simulation model (CATSIM), this financial risk management decision is analyzed within the context of a public investment decision.

Disaster safety nets for developing countries: Extending public-private partnerships

Abstract In developed countries, public—private partnerships involving insurance companies and governments often provide security against the human and economic losses of disasters. These partnerships, however, are neither available nor affordable in most highly exposed developing countries. In this paper we examine recent innovations in financial risk management that extend traditional public—private partnerships to include NGOs, international financial institutions and other donors. Importantly, these partnerships provide secure financial arrangements to low-income communities before disasters strike and thus relieve the uncertainty and anxiety of depending on ad hoc post-disaster aid for recovery and even survival. We examine three examples of extended partnerships: the Turkish Catastrophe Insurance Pool; the Andhra Pradesh microinsurance program and an index-based weather derivative for farmers facing drought in Malawi.

Catastrophe risk models for evaluating disaster risk reduction investments in developing countries.

Major natural disasters in recent years have had high human and economic costs, and triggered record high postdisaster relief from governments and international donors. Given the current economic situation worldwide, selecting the most effective disaster risk reduction (DRR) measures is critical. This is especially the case for low- and middle-income countries, which have suffered disproportionally more economic and human losses from disasters. This article discusses a methodology that makes use of advanced probabilistic catastrophe models to estimate benefits of DRR measures. We apply such newly developed models to generate estimates for hurricane risk on residential structures on the island of St. Lucia, and earthquake risk on residential structures in Istanbul, Turkey, as two illustrative case studies. The costs and economic benefits for selected risk reduction measures are estimated taking account of hazard, exposure, and vulnerability. We conclude by emphasizing the advantages and challenges of catastrophe model-based cost-benefit analyses for DRR in developing countries.

The contribution from shipping emissions to air quality and acid deposition in Europe

Abstract A global three-dimensional Lagrangian chemistry-transport model STOCHEM is used to describe the European regional acid deposition and ozone air quality impacts along the Atlantic Ocean seaboard of Europe, from the SO2, NOx, VOCs and CO emissions from international shipping under conditions appropriate to the year 2000. Model-derived total sulfur deposition from international shipping reaches over 200 mg S m−2 yr−1 over the southwestern approaches to the British Isles and Brittany. The contribution from international shipping to surface ozone concentrations during the summertime, peaks at about 6 ppb over Ireland, Brittany and Portugal. Shipping emissions act as an external influence on acid deposition and ozone air quality within Europe and may require control actions in the future if strict deposition and air quality targets are to be met.

Probabilistic cost-benefit analysis of disaster risk management in a development context

Limited studies have shown that disaster risk management (DRM) can be cost-efficient in a development context. Cost-benefit analysis (CBA) is an evaluation tool to analyse economic efficiency. This research introduces quantitative, stochastic CBA frameworks and applies them in case studies of flood and drought risk reduction in India and Pakistan, while also incorporating projected climate change impacts. DRM interventions are shown to be economically efficient, with integrated approaches more cost-effective and robust than singular interventions. The paper highlights that CBA can be a useful tool if certain issues are considered properly, including: complexities in estimating risk; data dependency of results; negative effects of interventions; and distributional aspects. The design and process of CBA must take into account specific objectives, available information, resources, and the perceptions and needs of stakeholders as transparently as possible. Intervention design and uncertainties should be qualified through dialogue, indicating that process is as important as numerical results.

Reviewing estimates of the economic efficiency of disaster risk management: opportunities and limitations of using risk-based cost–benefit analysis

There is a lot of rhetoric suggesting that disaster risk reduction (DRR) pays, yet surprisingly little in the way of hard facts. This review paper examines the evidence regarding the economic efficiency of DRM based on CBA. Specifically, it addresses the following questions: What can be said about current and best practice regarding CBA for DRR including limitations and alternatives? And, what, if at all, can be said in terms of quantitative insight for informing policy and practice? The review compares the documented evidence on the net benefits over a range of disaster management interventions, such as risk reduction, preparedness and risk financing. The review also critically discusses the applicability of cost–benefit analysis as well as other economic decision-supporting tools for assessing the efficiency of certain DRM interventions. Disaster risk is characterized by variability, which requires a risk-based assessment. As a key best practice criterion, and in order to avoid overestimating the benefits and returns on investment, the review focuses on studies that provide a risk-based estimate of benefits. This review shows that for the limited evidence reported the economic case for DRM across a range of hazards is strong and that the benefits of investing in DRM outweigh the costs of doing so on average, by about four times the cost in terms of avoided and reduced losses. In an age of austerity, cost–benefit analysis continues to be an important tool for prioritizing efficient DRM measures but with a shifting emphasis from infrastructure-based options (hard resilience) to preparedness and systemic interventions (soft resilience), other tools such as cost-effectiveness analysis, multi-criteria analysis and robust decision-making approaches deserve more attention.

Advancing methodological thinking and practice for development-compatible climate policy planning

There are growing calls for identifying climate mitigation and adaptation policy packages that would also support human development objectives at the national and regional levels. The literature on climate policy analysis and impact assessment continues to be driven by standard economics with its body of competitive general equilibrium optimization models and cost-benefit analysis techniques of aggregation and monetization. However, its recommendations for climate action are often based on highly restrictive underlying assumptions, which have been increasingly criticized for being too prescriptive, not adequately capturing salient observed socioeconomic realities, and not acknowledging pluralism in values. The main aim of this paper is to put forward a new methodological approach that seeks to address these deficiencies. A generic but comprehensive framework eliciting mitigation-adaptation-development interactions, accounting for institutional barriers, and drawing on a combination of an emerging body of new climate economics and multi-criteria decision analysis is suggested. We purport that, by using this framework, multi-dimensional impacts and multi-stakeholder interests could be better represented when planning climate policy actions. We also argue that analytical tools drawing on economic thinking which embraces interdisciplinary analysis and deep uncertainty and avoids the fallacy of unique optimal solutions, may deliver more effective strategies for pushing economies onto the transformational pathways required.