InsuResilience in conversation with Dr. Daniel Clarke, Director Centre of Disaster Protection
The Covid-19 pandemic is threatening the lives and livelihoods of people already vulnerable to climate disasters. Various institutions have been activated to react to this crisis through flows of financial support to these countries that are at the verge of falling further or into poverty when these shocks happen. What kind of response mechanisms has the Centre for Disaster Protection observed that is working well and what is not from this years‘ experience in coping with the Covid-19 pandemic? What are significant lessons that can be drawn?
Covid-19 has caused a complex crisis. It is not just a health shock. Most countries are currently being buffeted by three coincident shocks: the Covid-19 health shock itself, a shock from domestic containment measures, and the shock of a global economic slowdown. These shocks are hitting countries at different times and in different ways. But they are hitting every single country. Climatic and other kinds of shocks are then on top of this.
With all this complexity, the Centre for Disaster Protection has been tracking where Covid-19 response funding has been going, and we are finding that flows have been directed towards economic losses rather than the places where poverty will increase most. Per person flows from the international system are actually lower for those living in countries with high poverty rates, or where Covid-19 is expected to increase poverty the most.
The fundamental problem is how the international system planned financially for a potential pandemic. Financially, the development system is built on banks, and the humanitarian system consists of bank accounts. The plan for a global crisis seems to have been to reallocate (existing funding towards crisis response), lend (more to countries who could afford to borrow), and hand round a begging bowl (to the international community). With begging bowls left largely unfilled, countries are only able to access more money if they can take on more loans. This leaves poor countries at high risk of debt distress behind.
The Covid-19 pandemic provides leverage for reviewing the scope of disaster risk financing schemes and mechanisms. Where do you see intersections between pandemic risks and climate risks? What is your recommendation on how to develop effective schemes that cover a broad range of “disasters” or compound risks?
At the global policy level, the world urgently needs a reformed international crisis financing system. It needs to stop systematically treating disasters like surprises. There needs to be a process for working together to identify priority risks in a collaborative, transparent, objective way, prioritising the types of crisis that will have the most damaging impacts on the lives of the poorest people and most vulnerable communities. Through the Intergovernmental Panel on Climate Change (IPCC), we have something that does this for long term climate risks. But there is nothing really equivalent that takes a multi-hazard approach to more immediate disaster and crisis risks. Without this, attention will be focused on the wrong risks.
And in addition to identifying priority risks we need a system that does something about them, providing concessional finance to coherent crisis risk financing packages at a country level. These packages can’t just be packages of banking instruments. Covid-19 is showing us that countries, just like people, need insurance when disasters strike, as well as low interest credit cards. The world needs great development insurance, not just development banking, if countries are to be well-protected against large humanitarian and economic shocks. This is as true for climate risks as it is for pandemic risks.
Finally, there needs to be much better learning within and between climate and pandemic risk finance schemes. The Centre for Disaster Protection’s analysis of the World Bank’s Pandemic Emergency Financing Facility (PEF) revealed how many of the problems it faced were similar to basic problems we continue to see with climate risk finance schemes: the triggers were too clever for their own good, its objectives were unhelpfully mixed, and there was limited involvement of at risk people or commitment to learning. Now, despite a US$196 million payout, the World Bank has chosen to shelve the scheme rather than fix it, just at the time when we need international financing institutions to step up on pandemic risk financing. Perhaps if climate risk finance schemes had a culture of independent evaluation, and had been more open about past failures, these basic issues with PEF could have been picked up at the design stage, and we could have avoided the World Bank throwing the baby out with the bathwater.
For a system to be effective in dealing with a disaster, pre-emptive planning must be done at the country level with the inclusion of relevant stakeholders and the financing be easily accessible to vulnerable people once disasters happen. This does not only ensure a quick response, but the funds reach the targeted individuals that were planned for. This crisis period has shown that systems put in place are lacking capacities in one way or another. In your opinion, how can disaster risk financing, including the Covid-19 response funds, be more accessible to the poorest and most vulnerable people when they need it most? And what mechanisms have to be set in place to support the poor and vulnerable target group?
We need to move away from the view that disaster risk financing is a technocratic exercise that should be done in secret, to a recognition that it should involve both transparency and accountability to at-risk people and communities.
If we want disaster risk financing schemes to benefit poor and at risk people, those with some influence in programme design should identify who the programme is supposed to benefit, find ways to build their capacity so that they can contribute meaningfully, and then involve them in design, planning, implementation, and evaluation, all the while ensuring that information flows effectively both from and to them.
This is a far cry from current practice in the international system. Very few national disaster risk financing strategies have been published, even those financed by development loans. Very few disaster risk financing instruments publish their triggers or plans for how money will be disbursed (again, even those financed by aid). With the exception of the African Risk Capacity (ARC), who has a ten year independent evaluation, no sovereign risk finance schemes I can think of have committed to an independent evaluation, let alone one where at-risk communities have a role in setting the questions and joining the learning process.
Interview conducted by the InsuResilience Secretariat