There is a close link between development and disaster risk. According to a recent report, “Reducing Disaster Risk: Challenge for Development,” disaster risk accumulates historically through inappropriate development interventions. Countries with similar patterns of natural hazards have widely varying levels of disaster risks. Natural disasters also tend to have a disproportionate impact on less developed countries causing much greater losses in terms of fatalities and GDP than in developed countries.

If disaster impacts are not anticipated and planned for, the diversion of scarce resources to relief and reconstruction efforts can have high opportunity costs in terms of economic development and welfare. Pro-active risk management entails the incorporation of loss mitigation and financing measures into development planning. Besides the macroeconomic effects on economic growth and development, disasters often place intractable burdens on poor households and small businesses. Who pays for catastrophic losses? Who owns the risk? These questions should be addressed by policymakers.

The objective of this specialization course is to provide policymakers with tools for financial risk management for assets belonging to households, businesses and the public sector. On the macroeconomic level, it provides a methodology for assessing the risks to public infrastructure and the effects of natural disasters on economic growth. An important question posed in this course is: under what conditions is it advisable for the public authorities to insure roads, bridges and other infrastructure, and when should they rely on traditional post-disaster financing? In answering this question, the course compares alternative financing options for public-sector risks and examines their costs and benefits. Another core question is the extent to which public authorities do and should take financial responsibility for risks to households and businesses. In addressing this question, this course examines strategies for public-private national insurance programs.