Special lecture: Economic aspects of disasters Ricardo Zapata-Marti Regional Advisor Focal Point for Disaster Evaluation

1. Special lecture: Economic aspects of disastersRicardo Zapata-MartiRegional AdvisorFocal Point for Disaster Evaluation, ECLAC Task Force for Emergency Preparedness Second Emergency Management CEO SeminarAugust 12-14 Lima, Perú

2. The bottom line • Experience over the recent years both in Latin America and Southeast Asia supports the notion that a comprehensive socioeconomic and environmental assessment of disasters leads to a profiling of disasters that enables the formulation of reconstruction of affected infrastructures (including the protection of critical infrastructures, with particular reference to public security in sectors such as health, water and sanitation, food security, energy, etc.). • A comprehensive analysis of damage (physical destruction of assets in all sectors of a society, community or economy valued at replacement costs) and losses (income lost, production not realized, employment reduction, budget deficits associated wih post-event emergency and recovery expenditures and tax revenue losses incurred) allows • a perspective on cross-cutting themes such as gender and disasters, ethics in risk management, environmental risk and the issues of governance, • risk dialogue and consensus building based on assessments, and the mobilisation of resources for risk reduction

3. ] New Gap ] An additional deficit is created from the pre-existing gap between the prevalent situation vis-à-vis the development goals and the emerging recovery objectives.

4. HUMAN • Health • Education • Livelihoods • Housing and shelter • Cultural identity SOCIAL Social capital and social networks (solidarity and equity) Family ties, gender perspective and extended family networks and links Violence, security and rights NATURE / ENVIRONMENT Clean water, wage disposal and sanitation Clean air Biodiversity and integrity of ecosystems Climate variability and change • PHYSICAL INFRASTRUCTURE • Quality and resilience of human built environment (settlements and rural/urban planning) • Transport and communications, energy and other basic lifelines • Productive infrastructure • Other built infrastructure (public services, government buildings) • POLITICAL • Governance • Transparency • Participation, inclusion and political rights • Access to information • FINANCIAL • Access to credit • Land tenure, legal rights • Compensatory mechanisms and funds • Insurance and financial protection

5. Risk management and adaptation Damage and costs MANAGEMENT, TRANSFER AND REDUCTION MITIGATION ADAPTATION EVOLUTION HAZARDS Baseline modified by variability and change RISK Multi stresses More severely affected by vulnerability but aggravated by changes in hazards patterns VULNERABILITY Diverse, local Sector specific RESILIENCE

6. An integrated framework, a systemic perspective IMPACTS ON NATURAL NAD HUMAN SYSTEMS Food and water resources Ecosystems and biodiversity Human settlements Human health CLIMATE CHANGE Temperature rise Sea level rise Precipitation change Droughts and floods Adaptation Unwanted evolution Adaptation and Mitigation EMISSIONS AND CONCENTRATIONS Greenhouse gases Pollution (air, water, soil, sea) Socioeconomic development paths Economic growth Technology Population Governance Current paradigm

7. Reasons for the increase in natural catastrophes and natural catastrophe losses • Global population growth (exponential development); in 1800, for example, there were one billion people living on the earth, today there are 6.3 billion. • The rising standard of living in nearly all countries of the world produces growing accumulations of wealth which are hit in the event of a catastrophe. • Concentration of population and values in conurbations: the emergence of numerous mega cities - even in exposed regions (e.g. Tokyo: 30 million inhabitants) • Settlement and industrialisation of very exposed regions, especially coasts and river basins, tourism in danger zones, e.g. Florida • Vulnerability of modern societies and technologies, structural engineering, devices and equipment, networks; problems involving suppliers too • Increasing insurance penetration throughout the world, i.e. the proportion of insured goods is mounting globally. Consequently, insured losses are escalating even faster. • Global changes in environmental conditions, climate change, water scarcity, loss of biodiversity

12. ECLAC´s disaster assessments over the years

13. Total insurance growth, penetration and density by region

14. Appropriation of risk needed to promote risk reduction: • Need for institutional and regulatory changes • Use of market to value (“price”) risk • Need for social policies for compensation and promotion (provide gender, age, ethnic sensitive instruments) • See risk reduction as a business opportunity Imperfect or inactive markets require government action / intervention

15. LEVEL OF DISASTER IMPACT • Indicates coping and adapative capacity Excedence (residual or excedent risk) Risk to be covered (financial gap) “Acceptable risk”

16. ESTABLISHING RISK FINANCING NEEDS CAT bonds Probability or return period Risk type 50-200 years Parametric coverage Resource gap Catastrophic risks 20-30 years Contingency funds Budget constraint 2-3 years Reserve funds Recurrent multi-hazard risks

17. Policy implications • Exposure to disaster risks is not unlike exposure to other risks (financial, commercial, social, political) • Exposure to risk has a positive correlation with poverty: disasters impacts are not distributed homogeneously neither in location nor in impact • Social impact is regressive: direct linkage between vulnerability and poverty, vulnerability and marginalization, vulnerability and gender or ethnicity

18. Appropriation to promote reduction of risk (in the face of extreme events and climate change) • Need for regulatory and institutional changes • Markets as clearing houses to price risk (beyond insurance) • Need for social policies for compensation, promotion and solidarity • Risk management is an investment / business opportunity • Imperfect markets require governmental intervention

19. The role of ECLAC – in respect of disaster assessment and risk reduction • In response to its member countries, has over 35 years assessed disasters’ socioeconomic impact • Developed a methodological tool for damage and loss assessment (DALA), now recognized as the international standard for post-disaster assessment • Has accumulated quantitative evidence that allows for economic analysis of risk, which may be extrapolated for disaster’s future impact and could be used to quantify partially the socioeconomic implications of climate change and approach the valuation of adaptation costs • Has increased national capabilities and contributed to policy changes in Latin America and the Caribbean and in other regions, namely South East Asia in cooperation with ESCAP and the World Bank’s GFDRR

20. Thank you! http://www.eclac.org/ http://gfdrr.org/ http://www.proventionconsortium.org/ http://groups.google.com/group/pdna-for-recovery http://www.recoveryplatform.org http://www.undp.org/cpr/iasc