Resource information
This report addresses the large flood
exposures of Central Europe and proposes efficient financial
and risk transfer mechanisms to mitigate fiscal losses from
natural catastrophes.. The report is primarily addressed to
the governments of the region which should build into their
fiscal planning, the necessary contingent funding
mechanisms, based on their exposures. While there exist
pan-European mechanisms such as the EU Solidarity Fund to
help EU members fund mega disasters, these only kick in at
extremely high loss levels. Given these issues, the
Governments of the V-4 countries should consider it a
priority to set up risk transfer mechanisms to reduce fiscal
volatility following natural catastrophes. The private
sector insurance markets in the V-4 countries appear
adequate and reflect rather high levels of penetration in
the economy and in the housing sector. Economic and fiscal
analyses based on global data also show that countries with
insurance mechanisms and markets show a stronger GDP
recovery path and lower fiscal deficits following a
disaster. However, the V-4 countries, having a common hazard
of flood, are in a unique position to develop highly cost
effective flood insurance mechanisms. As countries in
general are more concerned with supplemental fiscal
resources rather than individual property losses, the
governments of the V-4 countries can consider parametric
style contracts. Nevertheless, risk transfer or insurance
mechanisms are not the only types that need to be
considered. The analysis in this report is meant to show,
besides the financial mechanisms that would be beneficial
for risk management, what large catastrophe exposures exist
and their relation to government finances and macroeconomic
measures. Following a final phase of feasibility analysis
and market testing, the V-4 countries should thus consider
establishing a multi-country insurance pool to provide fast
emergency funding after disasters.
