The Last Mile: Delivery Mechanisms for Post-Disaster Finance Prepared by the World Bank for the G7 Environment, Energy, and Oceans Ministers 1 The Last Mile: Delivery 1. Introduction Mechanisms for Post- Risk reduction and disaster prevention are critical in curbing the large human and economic costs of disasters. Disaster Finance† The devastation caused by the 2017 hurricane season in the Caribbean has shown that years of development gains can be wiped out overnight if these gains are not resilient to shocks. Likewise, any future economic growth that is built Governments now have access to a large and on vulnerable infrastructure and non-risk-informed policy growing range of financing instruments for rapidly frameworks is at risk. As the economies and populations of mobilizing funds in the aftermath of a disaster. countries continue to grow, risk management needs to be Instruments like reserve funds, contingent lines placed at the very heart of long-term development strategies. of credit, and insurance programs are critical for Risk-informed development strategies are key to reduce financing relief, recovery and reconstruction efforts, risk and avoid future disasters; however, disaster risks and they have a demonstrated impact on the ability of cannot be fully eliminated. The question is not whether governments to manage large-scale disasters. another major hurricane or earthquake will strike, but when. In a changing climate, governments must be especially The availability of financial resources however, is prepared for more intense storms, more active hurricane only half of the story. The capacity of a government seasons, heavier rainfalls, and stronger coastal floods. Further, to support post-disaster recovery and reconstruction continued urbanization and population growth, especially in depends substantially on its ability to deliver these coastal areas, are bound to magnify these impacts of climate resources effectively to where they are needed. Doing change in the coming decades. Prevention and risk-informed so requires that governments are prepared before a development can ensure that exposure and risk are minimized, disaster hits, with the right instruments, institutions, but all economies and societies will remain exposed to residual and capacities in place. By preparing contingency risk that needs to be considered and addressed. plans, defining responsibilities, adopting appropriate regulations and norms, enhancing financial inclusion Thus, it is essential for governments to prepare in advance and insurance regulations, and establishing flexible for future shocks; part of the challenge is to prepare the and gender-inclusive social protection systems, emergency response, in the hours and days that follow a governments could improve the reconstruction disaster. Authorities can significantly improve the effectiveness process and generate over $173 billion per year in of their emergency response by taking concrete measures: pre- benefits. defined evacuation routes and logistics, adequate and gender- sensitive shelters, and clearly defined roles and responsibilities There are major synergies between the financial for national and local authorities are all key for effective instruments that make the resources available and disaster preparedness. The pre-positioning of relief assets can the systems that deliver these resources where ensure that the crisis response begins without having to rely on they are needed. In the next few years, the design vulnerable transport infrastructure. Well-trained and efficiently and implementation of new financial instruments deployed search and rescue teams are key to saving lives in the will offer an unprecedented opportunity to improve immediate aftermath of an adverse event. the last-mile delivery of post-disaster support. This But preparedness goes beyond the emergency phase to opportunity should not be missed. include the longer recovery and reconstruction phases, which also benefit from ex-ante preparedness. After the emergency phase – when the focus is on saving lives and † This report has been prepared by Stephane Hallegatte and Jun Rent- providing humanitarian relief – comes the recovery and schler, building on the World Bank and GFDRR report “Building Back reconstruction period, during which basic services are Better.” It benefited from inputs from Thomas Bowen, Jack Campbell, Marc Forni, and Olivier Mahul, and was edited by Nick Paul. restored, buildings and infrastructure are repaired, and 2 / The Last Mile: Delivery Mechanisms for Post-Disaster Finance livelihoods and economic activities are restored to their pre- … stronger, so that reconstructed infrastructure, buildings, disaster level or better. Governments can significantly reduce and factories can resist more intense events in the future, and the impact of disasters on economic growth, livelihoods, and countries escape the cycle of repeated disasters. well-being by improving the effectiveness, speed, and quality Mobilizing funds and preparing effective delivery of post-disaster recovery. mechanisms are key for fast and effective post-disaster recovery. The effectiveness of post-disaster response is Figure 1. Building Back Better (BBB): The three phases of determined by two key challenges: post-disaster recovery 1. Mobilizing finance for managing crises: Rapidly mobilizing the necessary funds to finance relief, recovery, and reconstruction efforts. 2. Mechanisms for effective delivery: Effectively channeling these funds to beneficiaries and those in charge of implementing efforts on the ground. This note will discuss these two issues in turn, with a focus on the second challenge, i.e. the effective “last mile” delivery of post-disaster support to the right agencies, regions or municipalities, businesses, and people. The full benefits from disaster risk finance instruments – such as reserve funds, insurance contracts, or contingent financing – will be fully realized only if the resources they make available are used in an efficient and appropriate manner. Effective post-disaster recovery can deliver major economic 2. Mobilizing finance for benefits. The World Bank’s recent Building Back Better report estimates that by improving governments’ ability to manage managing crises the recovery and reconstruction and by rebuilding better after Disaster response tends to involve substantial budget disasters, the total wellbeing impact of natural disasters in the reallocation, which can be costly and slow.2 In Indonesia, world can be reduced by 31 percent – a gain equivalent to $173 district government spending has been found to vary strongly billion per year.1 Building back better is particularly important following natural disasters at the local level.3 In the case of in small island countries, due to their high current levels of flooding, for example, districts reallocate spending towards vulnerability and their small scale. For instance, building back sectors such as health and infrastructure, at the cost of general better could lead to an average reduction in disaster-related administration. Risk financing programs could help with wellbeing losses of 38 percent in Jamaica, 52 percent in the stabilizing district-level spending across sectors, facilitating Republic of Fiji, and 72 percent in Dominica. faster resource mobilization, and improving budgetary These benefits would come from a recovery and reconstruction planning processes. process that is… Governments that secure fast and reliable access to … faster, so that people and businesses can recover as quickly contingency financing are better prepared to manage future as possible, minimizing losses in consumption and well-being. crises. In the immediate aftermath of a disaster, governments typically need to raise significant financing for response and … inclusive, so that every man and woman can recover and recovery measures. Instruments to manage the impact of nobody stays locked in poverty due to the shock, reducing long- natural disasters on public finance and social expenditures term impacts. 3 make it possible to maintain a more stable level of district-level the SRF has been fully used for previous events. Maintaining spending in different sectors, and enhance public spending large contingency reserve funds can be costly and politically efficiency. Three main ways exist for governments to ensure challenging, especially in countries that are not affected by liquidity: (i) maintaining sufficient reserve funds, (ii) arranging disasters on a regular basis. for contingent credit facilities, or (iii) using insurance schemes or transferring risks. 2.2. Contingent financing Governments can structure these financial instruments along Contingent lines of credit can serve as an early financing “risk layers”, with different instruments covering different tool while funds from other sources such as government types of risks (see Figure 2). By using a layered disaster risk reallocations, bilateral aid, or reconstruction loans become financing strategy, countries such as the Philippines or Mexico available. They allow countries to address an emergency have prepared for a wide range of contingencies. While reserve without diverting resources from existing social and economic funds are used to manage low-cost, high-probability events, development programs. Moreover, these financial instruments contingent financing and sovereign risk transfer instruments provide a platform for developing integrated risk management are used for high-cost, low-probability events. strategies and investments that go beyond disaster response to enhance preparedness and resilience while strengthening Figure 2. A layered risk financing strategy4 governments’ financial capacity to respond to shocks. Multiple institutions – such as the World Bank, the Low frequency High intensity Sovereign Risk Transfer • Insurance (incl. risk pools) Insurance of Public Assets Inter-American Development Bank (IDB) and the Japan • Derivatives • Catastrophe bonds International Cooperation Agency (JICA) – offer contingent Contingent Financing Post-crisis Financing lines of credit for disasters. The World Bank’s Catastrophe Hazard • World Bank, IDB, JICA: Deferred Draw-Down Option (DDO) • Emergency lending • • Contingent Emergency Response Components (CERC) IDA Crisis Response Window (CRW) • Bi- or multilateral financing Deferred Drawdown Options (Cat-DDOs) provide immediate liquidity following a disaster and help strengthen DRM High frequency Budgetary Instruments Low intensity • Sovereign reserve funds • Contingent budget • Government reserves • Budget reallocation capacity. Since 2017, Cat-DDOs are available to all members of the International Development Association (IDA) – i.e. Short-term liquidity Time Long-term financing needs low-income countries – and Kenya (USD 200m) was among the first to sign IDA credits with a Cat-DDO. The IDB launched its Contingent Credit Line for Natural Disasters in 2012 to help countries cover urgent financing needs that arise immediately 2.1. Reserve funds after a natural disaster, and in 2013, the JICA established the Governments in disaster-prone countries operate national Stand-by Emergency Credit for Urgent Recovery (SECURE), to reserve funds which are earmarked to provide immediate provide immediate post-disaster financing. Contingent credit liquidity for financing post-disaster relief and recovery. has also been successful in bringing about a dialogue on In the Philippines, the National Disaster Risk Reduction and broader disaster risk management, and has been instrumental Management Fund and the Quick Response Fund finance a in engaging ministries of finance on the disaster risk range of disaster-related expenditures. Similarly, Vietnam’s management agenda. State Reserve Fund (SRF) is a public fund that provides in-kind The World Bank also offers Contingency Emergency post-disaster emergency relief, including food and equipment. Response Components (CERC) and post-disaster financing through the Crisis Response Window of the International However, reserve funds have limited capacities and cannot Development Association (IDA CRW). The CERC is an be designed to cope with the rarer and more extreme additional instrument designed to support emergency events.5 In the Philippines, Typhoon Yolanda raised questions response and preparedness at the project level and across about the adequacy of the Quick Response Fund’s volume, sectors to quickly mobilize pre-approved funds in the face of and the replenishment process if it is emptied by a major a disaster, including disease outbreaks. It allows for the rapid event or a series of smaller disasters. Vietnam has been reallocation of investment project funds toward urgent post- repeatedly affected by disasters at the end of the year, when disaster recovery needs, following adequate ex-ante technical 4 / The Last Mile: Delivery Mechanisms for Post-Disaster Finance preparation and logistical planning for its disbursement and panel of international private reinsurance firms. The program use. For instance, a CERC was recently applied to support complements other funding sources, such as the national and Jamaica with enhancing its resilience to disaster risks. local disaster risk reduction management funds and contingent Similarly, the IDA CRW provides low-income countries with credit, that protect against less severe natural disasters. additional resources to respond to severe economic crises and Regional insurance mechanisms can be an effective way major natural disasters, enabling them to return to their long- to pool disaster risks, and provide affordable sovereign term development paths.‡ catastrophe risk transfer to governments. The Caribbean Catastrophe Risk Insurance Facility (CCRIF) pools disaster risks 2.3. Sovereign risk transfer across 16 countries, and provides governments with quick, short-term liquidity for financing responses and early recovery National catastrophe risk insurance programs can act as from major earthquakes or hurricanes. The Pacific Catastrophe a last line of defense against severe natural disasters. In Risk Assessment and Financing Initiative (PCRAFI) and African 2017, the Philippines launched a catastrophe risk insurance Risk Capacity are more recent examples of donor-supported program to protect national and local government agencies regional mechanisms that offer quick-disbursing, index- against the financial losses from severe natural disasters. based coverage against tropical cyclones and earthquakes. In Under this program the Government Service Insurance addition, PCRAFI provides Pacific island countries (including System (GSIS), a public insurance agency, provides US$206 the Marshall Islands) with disaster risk modeling and million in aggregate coverage to protect assets of the national assessment tools. government and 25 highly-exposed provinces. The World Bank acts as an intermediary for the transfer of GSIS’s risk to a Using catastrophe bonds, governments can leverage resources and transfer disaster risks to international capital markets. As part of its disaster risk management ‡ Moreover, through the International Finance Corpora- efforts, the Government of Mexico established the Fund for tion (IFC), the World Bank Group is developing contingent Natural Disasters (FONDEN) to support disaster relief and financing tools for private sector institutions including small reconstruction. FONDEN leverages private sector financing and medium sized enterprises and financial institutions. Box 1. The Global Risk Financing Facility The Global Risk Financing Facility (GRiF) is a new financing mechanism to be established in the World Bank Group, in partnership with donor and developing-country partners. The Facility is aimed at strengthening financial resilience by investing in more timely and reliable crisis response and recovery systems. It will achieve this by (i) establishing and scaling up pre-arranged climate and disaster risk financing instruments, including through market and non-market based insurance mechanisms; (ii) developing new instruments for contingent financing, e.g., concessional grants/credits, interest rate buy-down; (iii) piloting innovative approaches such as risk transfer mechanisms in infrastructure finance, which, where proven effective, could be mainstreamed into conventional toolkits over time; and (iv) addressing increased risk in fragile and conflict-affected countries, in partnership with humanitarian actors. GRiF will be implemented through a Multi-Donor Trust Fund with an expected contribution of US$180M from Germany and UK, with other potential contributions under discussion. This includes an initial $30M contributed by Germany and UK through the InsuResilience Climate Risk Financing and Insurance Program. The GRiF will be a member of the Programme Alliance of the InsuResilience Global Partnership. It will be implemented by the World Bank, including the newly established World Bank Disaster Risk Finance and Insurance hub of the Centre for Global Disaster Protection in London. GRiF will complement the existing climate finance and crisis finance architecture, focusing on scaling up and strengthening risk financing initiatives to reduce the burden on existing crisis response mechanisms such as the Crisis Response Window. 5 as part of a strategy that layers risk retention and risk Table 1. Cost multipliers of different financial instruments for transfer instruments. In 2006, FONDEN issued a $160 million risk management7 catastrophe bond to transfer Mexico’s earthquake risk to the Instruments Indicative cost Disbursement Amount of funds international capital markets. Though costly, financial schemes multiplier (months) potentially available like this can disburse funds more rapidly than public budgets. Ex-post financing And by predefining payout rules for allocating post-disaster Donor support (humanitarian relief) 0-1 1-6 Uncertain Donor support (recovery and reconstruction) 0-2 4-9 Uncertain support, formal insurance and financial products can reduce Budget reallocations 1-2 0-9 Small political economy biases and improve transparency and Domestic credit (bond issue) 1-2 3-9 Medium External credit (e.g., emergency loans, bond predictability. issue) 1-2 3-6 Large Ex-ante financing Budget contingencies 1-2 0-2 Small 2.4. The cost and benefits of financial Reserves Contingent credit 1-2 1-2 0-1 0-1 Small Medium instruments Parametric insurance Alternative Risk Transfer (for example CAT 1.3 and up 1.5 and up 0-2 1-6 Large Large bonds, weather derivatives) Traditional (indemnity-based) insurance 1.5 and up 2-12 Large The choice of financial instruments is determined not only by their functionality, but also their cost. Table 1 provides an indicative cost multiplier for different financial risk instruments. The cost multiplier is defined as the ratio between the cost of the financial product (such as the premium of an 3. Mechanisms for effective insurance product, or the expected net present value of the delivery cost of a contingent debt facility) and the expected payout over its lifetime. A ratio of 2 indicates that the overall cost of Even if post-disaster funds are successfully mobilized, their the financial product is likely to be twice the amount of the effective delivery can remain a serious challenge. It is indeed expected payout made over a long period of time. The speed common to see post-disaster support to affected populations at which funds can be obtained is also determined by the and for reconstruction work being delayed by months, even underlying legal and administrative processes.5 in place where financial resources are available. Delays can result from multiple causes, including a lack of clearly defined Financial instruments cannot be compared solely by their responsibilities and accountabilities, the need for data financial costs and volumes. Other important considerations collection to provide support to heavily affected households, include the speed of disbursement, and the transparency and and procurement issues for debris removal or reconstruction predictability of the resources. Rule-based instruments – such work. as index insurance products or risk transfer mechanisms based on measurable indicators – provide governments, technical By establishing effective mechanisms for delivering post- agencies, local authorities, firms, and households with a disaster financing, governments can substantially reduce predictable amount of support. This makes it possible for them the economic and well-being impact of natural disasters. to design their own response (e.g., taking their own insurance Governments need to ensure effective “last mile” delivery of contract). From a government perspective, it also helps build post-disaster to those who need them: (i) national agencies, discipline in how post-disaster resources are mobilized and local authorities, or private-sector providers which are in used. charge of restoring infrastructure services; (ii) businesses, to help them restart production and protect jobs; and (iii) Timeliness of support is essential for efficient coping households, to help them smooth the impact of the shock, and and recovery. While there is no global estimate of the cost to recover. The design of these delivery mechanisms should be of delaying the provision of post-disaster support, there is informed by three imperatives for the reconstruction phase: agreement that this cost is far greater than the financing costs. reconstruction that is faster, more inclusive, and stronger. Evidence from Ethiopia shows that every US$1 secured in contingency financing for timely and predictable disbursement for emergencies can save up to US$5 over the long term.6 3.1. Building back faster: ensuring that However, delivering this support depends not only on the funds can be delivered and used rapidly availability of resources, but also on the preparation of effective and transparent delivery mechanisms. Streamlined administrative processes for delivering 6 / The Last Mile: Delivery Mechanisms for Post-Disaster Finance resources to the right agencies and regions are essential. mobilize resources rapidly and effectively, and to jump-start In December 2004 an earthquake and subsequent tsunami debris removal and reconstruction in a pre-arranged and well- killed 221,000 in Aceh, Indonesia, alone. Nearly US$7 billion coordinated manner. in contributions flowed in from the Indonesian government and international donors, and nearly ten percent of these funds were contributed through the Multi Donor Fund for Aceh and 3.2. Building back more inclusively: Nias (MDF).8 Based on this experience, Indonesia established ensuring that every man and woman strong policies and institutions, including the newly-formed recovers National Board for Disaster Management (BNBP) and the Indonesia Disaster Fund (IDF), which is largely modeled on It is important to provide support to the people who really the Aceh MDF. These institutions have helped to significantly need it. This is particularly challenging in the context of streamline the post-disaster processes for rapid response and natural disasters, which have heterogeneous impacts and recovery in the country. require swift delivery of support. There is no single tool that can cover all households or businesses, and all events – Several key principles are now integral to Indonesia’s instead, a combination of measures is required (Figure 3). For example, richer households and businesses are more likely to disaster risk management and response strategy, a major be able to rely on their ability to access formal loans or buy objective of which is building back faster. For example, the insurance. Poorer people are more often reliant on informal government follows a phased approach that prioritizes the risk sharing mechanisms at the community level or social rapid rebuilding of homes and basic services (e.g. sanitation), insurance provided by the government. Exceptional, large-scale then progresses to non-essential infrastructure, and finally to catastrophes – such as the Haiti earthquake in 2011 – cannot economic development. It has also established streamlined be managed with the same instruments as those deployed in budgetary processes to ensure that funds can be disbursed the case of more frequent and relatively minor shocks – such as and transmitted quickly and efficiently to where they are most recurring drainage-related flooding. Insurance and contingent needed. In addition, all recovery projects integrate cross- finance are essential in the management of rare disasters, cutting elements, including community-based decision-making, while savings, reserve funds, and revenue diversification are disaster risk reduction, capacity building, gender inclusiveness, more cost-effective for managing frequent shocks. and environmental protection. Figure 3 – A combination of tools is necessary to protect The ability to finance a quick recovery depends on actions different households from different shocks10 taken before disaster strikes. These actions might include the development of realistic recovery plans, the strengthening of local agencies, the identification of providers for debris removal and reconstruction, and the clear assignment of responsibilities. The Government of Turkey started implementing a seismic risk management and emergency preparedness project in 2005, guided in part by the lessons of the 1999 Marmara earthquake. The package of measures included improving public awareness and institutional capacity of local public safety organizations, modernizing emergency communications and information systems, and expanding existing emergency response capacities.9 Moreover, central and local authorities prepared disaster response plans that define responsibilities and identify all service groups – including those from the private sector – needed for an efficient recovery. The overall objective of this emergency management system was to improve the ability of authorities at all levels to 7 3.2.1. Financial inclusion: the benefits 3.2.2. Market insurance: a critical tool, from saving instruments and access to with some limitations borrowing Market insurance can protect against larger losses. This is Financial services, especially savings instruments and especially the case for relatively well-off people or businesses, access to borrowing, are critical to the ability of households with asset bases large enough to justify the use of an insurance and firms to manage shocks.11 Inclusive access to financial contract. Domestic insurance markets have proved an effective services reduces the need for publicly-funded post-disaster channel for building resilience, especially through public- interventions by increasing the ability of households and private partnerships. The Turkish Catastrophe Insurance firms to manage their own risks. For example, in Accra, Ghana, Pool (TCIP) and the Mongolian Livestock Insurance Pool are households with access to emergency borrowing were found good examples of public-private partnerships that provide much more likely to recover quickly from the 2015 floods.12 In insurance coverage against natural disasters. In both cases, the fact, several countries (including Pakistan and Nepal) were domestic insurance market provides the mechanism through able to make significant progress with expanding access which governments reach households and businesses with to financial services as part of owner-driven post-disaster insurance products. While these programs have substantially reconstruction programs. increased insurance penetration at the local level, replication in other countries requires careful tailoring to local contexts. Financial inclusion is on the rise globally, but not Governments may also explore regulatory reforms to make consistently so, and the global gender gap in financial insurance coverage, particularly for seismic risk, mandatory for inclusion has not improved since 2011. 515 million adults households with mortgages. have opened bank accounts since 2014 – but gains are uneven across and within countries, and between men and women.13 The success of these schemes will likely be replicated Progress has been accelerated by mobile phones and the elsewhere. The World Bank–supported South-East Europe and internet. However, some countries are still lagging, with men the Caucasus Risk Insurance Facility initiative is working to more likely than women to have a bank account. In the Middle build a sustainable mass market for standardized catastrophe East and North Africa, for example, 52 percent of men have risk insurance products in participating countries. It offers bank accounts, but only 35 percent of women – the greatest options for reinsurance, standardized products, and web-based gender gap of any region. tools for underwriting and accumulation management through a specialized regional reinsurer, Europa Re. By improving financial inclusion, governments can also improve the effectiveness with which social support is However, efforts to provide universal access to insurance delivered to disaster-struck population groups. Financial face multiple obstacles, especially for poor people. These inclusion can significantly reduce the transaction costs and include weak institutional and legal capacity, high transaction administrative challenges of delivering social protection. costs, and other affordability issues. Nevertheless, there is Mobile phone-based payment schemes, by providing broadly strong complementarity between market insurance and social accessible financial services, can also increase the speed and protection, with insurance providing protection for the middle cost-effectiveness with which cash transfers can be disbursed class, while adaptive social protection is most efficient when in the case of a disaster. In Kenya, all households from the focused on the poor. Even if it covers only the nonpoor, market four counties covered by the Hunger Safety Net Program are insurance can generate major resilience gains and reduce preregistered, and they have been provided with bank accounts the financial pressure on the government: with reduced need to ensure quick delivery of cash transfers after an emergency to support the middle class after a disaster, it can focus its or a crisis. This was critical in the ability of the program to resources on the poorest and most vulnerable. provide comprehensive support over two weeks during the 2015 drought. 8 / The Last Mile: Delivery Mechanisms for Post-Disaster Finance 3.2.3. Adaptive social protection systems An impact evaluation of Fiji’s response to cyclone Winston showed that the social assistance funds were primarily used for delivering post-disaster assistance for emergency consumption and reconstruction.14 Within Social protection schemes increase the resilience of the four weeks of the cyclone, the majority of households had covered population, even if they do not include the risk spent their entire additional social assistance, primarily on from natural disasters in their design. This is because these essential items such as food and reconstruction materials. schemes – such as cash transfers, public work programs, or The evaluation shows that three months after the cyclone, school lunch programs – diversify people’s income, reduce beneficiaries of the Poverty Benefit Scheme were more likely their expenses, or provide them with a source of revenue that to have recovered than comparable households that did not is not as affected by shocks as their other income sources. receive the additional assistance. It was estimated that this support had a benefit-cost ratio greater than 4, and reduced the Existing social protection schemes can be used to transfer impact of Tropical Cyclone Winston on the poorest Fijians by post disaster support to those who need them most – more than 20 percent.15 including women and marginalized groups. Fiji’s social protection system, for example, has evolved over the years Social insurance and social safety nets are more efficient if to be gender-sensitive and rapidly responsive. In 2016, the they are “adaptive,” meaning that they can react quickly to category 5 Tropical Cyclone Winston struck Fiji, leaving shocks. Adaptive social protection systems can improve their behind severe destruction. The strength of the existing social support for poor people affected by disasters or environmental protection system allowed the government to provide support and economic shocks in two ways. They can increase the swiftly and efficiently. The government scaled up its three main number of beneficiaries through horizontal scale out, as in social assistance programs to provide top-up payments to Ethiopia’s Productive Safety Net Program, and they can the existing beneficiaries, including particularly vulnerable groups increase amount of support provided to existing beneficiaries such as women and pensioners. The cash top-up payments through vertical scale up, as in Fiji’s social safety net system. were intended to help people meet immediate recovery costs, The Sahel Adaptive Social Protection Program (ASPP) supports and were provided to all existing beneficiaries, irrespective of the design and implementation of such systems in six Sahel whether they resided in the affected areas. countries (Burkina Faso, Chad, Mali, Mauritania, Niger, and Senegal). Box 2. Universal health coverage contributes to resilience to natural disasters.10 Disaster risk insurance is not the only type of insurance that can boost resilience; health insurance is also critical to the management of natural risks. Natural disasters cause injuries and disabilities, and health shocks tend to push households into poverty, particularly where people have to borrow at high interest rates to access care.16 The World Health Organization (WHO) estimates that about 100 million people fall into poverty each year just to pay for health care.17 Better health care coverage and lower out-of-pocket expenses help the poor to manage catastrophic health expenditures and are thus efficient ways of reducing the health impacts of natural disasters and poverty.18 Provision of health coverage is possible at all income levels: Rwanda has invested in a universal health coverage system that today insures over 80 percent of the population. Context and implementation challenges will however continue to determine the optimal path for individual countries. 9 Box 3. Timeliness vs. Targeting: the trade-off in identifying those the most in need In the aftermath of a disaster it can be difficult to identify vulnerable households. The impacts of disaster are often heterogeneous, making geographic or demographic targeting approaches difficult. However, case studies suggest that the cost of a drought to households can increase dramatically if support is delayed, mainly due to irreversible impacts on children and asset holdings.6 Moreover, data is also very scarce on how losses are distributed within households, or across vulnerable groups such as women, children, the elderly, and disabled.19 To prepare for disaster, governments can develop large and flexible social registries. These include both potential and existing beneficiaries, with adequate information to identify the most vulnerable households. In Brazil, the Cadastro Unico registry includes households with a per capita income higher than the eligibility threshold of existing social programs. These may not currently be beneficiaries of social protection, but as they are considered to be vulnerable to shocks, they can be supported in a crisis. Post-disaster responses can occur in multiple stages. Initial, survival-related support can be delivered quickly, even at the expense of accurate targeting, with more substantial and better-targeted reconstruction support provided later. In Pakistan after the 2010 floods, the government implemented the Citizen’s Damage Compensation Program (CDCP). This cash grant program included two phases, to better balance the urgency of post-disaster support and the need to carefully target the larger transfers supporting reconstruction. Adaptive social protection schemes can help prevent Provision of rapid support to poor people cannot be easily humanitarian emergencies and long-term poverty traps.20 In improvised when a disaster occurs – thus preparation and Ethiopia, rural farmers affected by drought in 2005 and 2011, alignment with risk financing are crucial. Already before and covered by the Productive Safety Net Programme had a crisis, social safety nets need to be developed that can be consumption losses 25 percent lower than those of other rural scaled out or up rapidly following a shock to deliver adequate farmers.21 Similarly, during a severe drought in 2015, Kenya’s support to those who need it. This preparation needs to Hunger Safety Net Programme delivered support to more than comprise detailed designs features of the program, including a 100,000 households, and added a special transfer to 200,000 registry of beneficiaries; a robust financing strategy, including households in anticipation of further droughts. strong linkage with risk financing; and the definition of clear institutional arrangements, including with non-governmental Adaptive social protection programs and action through actors such as financial service providers. existing systems can help to cut intervention costs, and thus save money for governments, donors, and tax payers.21 3.2.4. Delivery mechanisms to support Because these systems are relatively flexible and fast, they can women and marginalized population reach people in affected areas and prevent last resort coping measures such as cutting down on food or taking children groups out of school, and they do it efficiently because they rely on Regardless of the financial instruments used, building back existing systems. Post-disaster transfers are estimated to have more inclusively means to design delivery mechanisms a benefit-cost ratio above 1.3 in the 117 countries studied in the that support women and marginalized population groups. World Bank’s Unbreakable report.10 And in 11 countries, every Disasters can have severe long-term consequences for some $1 spent on post-disaster transfers yields well-being benefits of households, for instance when people become locked in more than $4. poverty traps because their asset base has fallen below a 10 / The Last Mile: Delivery Mechanisms for Post-Disaster Finance critical threshold. Marginalized and disadvantaged groups are & Barbuda, offers the opportunity to ensure that destroyed especially at risk of experiencing such poverty traps, not least assets are reconstructed to more resilient standards, able to because they tend to have fewer support systems available to withstand more intense events in the future. them. Gender inequality in disaster impacts has been widely reported, and a disproportionate impact on children is well- Infrastructure can be strengthened and services improved established.22, 23, 24 after a disaster. In 2008, an 8.01 magnitude earthquake struck southwestern China, causing 69,000 fatalities and the The financial resilience of the poorest can be strengthened destruction of 34,000 km of highways, thousands of schools, through gender-sensitive programs. Uganda is strengthening hospitals, and wastewater systems, as well as more than 4 the financial resilience of the poorest through a large social million homes. In response to this disaster, the government protection and labor intensive public works (LIPW) program. ensured that the reconstruction of affected infrastructure In the case of a drought, a crisis response mechanism followed higher seismic standards and flood risk management automatically scales up assistance and enables rapid, codes. In fact, the restored infrastructure was not only built to transparent, and evidence-based provision of additional be more resilient to natural hazards than before the disaster assistance to affected households. The public works component – it also enhanced access to and service quality of essential requires that at least 40 percent of LIPW participants are public services, including water, sanitation, roads, health and women. To achieve this target, the program ensures that education. activities are located close to villages and appropriately meet the needs of women. Gender-sensitive measures are central Schemes may be developed to ensure that resources are to all project activities, including community engagement used for specific resilient reconstruction purposes and processes, decision making, and monitoring. delivered directly to those leading actual reconstruction efforts on the ground. When tropical cyclone Winston struck More generally, social protection and livelihoods programs Fiji in 2016, it destroyed about 30,000 houses. A massive can often be made more sensitive to women by applying rebuilding and recovery effort got underway, led by the simple rules.25 Examples include collaborating with Government of Fiji and supported by numerous relief and community-based organizations or women’s groups that have development organizations. Through its “Help for Homes” already established contacts with poorer female community program, the government offered grants, materials, and members; taking into account gender differences in literacy, technical training to assist people in the construction and mobility, access to public venues, labor schedules (for example, reconstruction of safer and more resilient homes – ensuring day fishermen/factory workers may only be available in the that houses and people could better withstand future cyclones. evening), and preferences for the means of participation; setting and enforcing quotas for female participation in In practice, the foundation for building back stronger is programs; where available, opening bank accounts in women’s best laid before a disaster. The G7 Ise-Shima Principles for names or jointly with the male heads of household; and Promoting Quality Infrastructure emphasize the importance ensuring grievance procedures are accessible to poor women of resilient infrastructure. To this end, strengthening the and men. institutional and technical capacities of public and private sectors is crucial for ensuring that there is sufficient design, construction, and quality assurance capacity in a post-disaster 3.3. Building back stronger – or ensuring situation. This should extend from building officials at all levels that reconstruction reduces future risks of government to contractors and individual builders, masons, and carpenters. Reconstruction phases provide rare opportunities to reduce the vulnerability of affected regions and countries.26 This It is critical to ensure that businesses and agencies can be achieved in part through risk-informed construction reconstruct according to modern building codes and risk- standards and smart spatial planning. For example, the large- informed designs. To ensure that resources are indeed used to scale physical destruction experienced in 2017 by several rebuild stronger infrastructure, without delaying reconstruction Caribbean island states, including Dominica and Antigua 11 in an unacceptable manner, governments have taken measures to pre-identify and contract firms with suitable expertise and to pre-approve resilient reconstruction designs. In Nepal, for instance, the government had several pre-approved reconstruction designs ready to be used as standards for the large-scale resilient reconstruction effort that followed the devastating 2015 earthquakes. 4. Conclusion The ability of a government to support post-disaster recovery and reconstruction depends critically on its ability to deliver resources effectively where they are needed. The availability of financial resources for post-disaster response is only half of the story: to deliver resources effectively, governments need to be prepared before a disaster hits, with the right instruments, institutions and capacities in place. Through the right combination of measures, governments could accelerate and improve the reconstruction process in a way that can generate more than $173 billion per year in benefits. These measures include contingency plans, clearly defined responsibilities in disaster aftermath, pre-approved contracts for debris removal and reconstruction, appropriate regulations and norms, enhanced financial inclusion and insurance regulations, and “disaster-ready” social protection systems. There are major synergies between the financial instruments that make the resources available and the systems that deliver these resources where they are needed. The reserve funds, contingent lines of credit, or insurance programs that are being created today offer great opportunities to also optimize the “last mile” delivery of post-disaster support to affected households and businesses, and to the agencies responsible for recovery and reconstruction. With more transparent and predictable resources, it is easier to design delivery mechanisms that are more disciplined, more efficient, and better able to minimize the long-term impacts of natural disasters. 12 / The Last Mile: Delivery Mechanisms for Post-Disaster Finance Endnotes 1  Hallegatte, S., Rentschler, J. & Walsh, B. Building Back Better: Achieving Resilience through Stronger, Faster, and More Inclusive Post-Disaster Reconstruction. (2018). 2  Cevik, S. & Huang, G. How to Manage the Fiscal Costs of Natural Disasters. 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