The international debate on strengthening the financial resilience to disasters is more front and center than ever before. Recurring hurricanes and floods, large-scale devastating wildfires and massive earthquakes are costing lives and create a significant negative impact on people’s well-being and economic development.

Natural disasters cause widespread damage and losses and fast growing economies are particularly exposed. Rapid and unplanned economic development increase vulnerability and exposure to natural disasters, while climate change could exacerbate the intensity and frequency of major meteorological disasters.

Large-scale catastrophic and smaller recurrent disasters In the remainder of this document, the term “disasters” refers to disasters resulting from natural hazards and excludes any other type of disaster. generate considerable economic losses. Over the past 30 years, damages from major disasters have increased significantly. In the last ten years alone, both high-income and fast-growing middle-income economies have experienced an estimated USD 1.2 trillion in economic costs from disruptive shocks due to hazards such as storms or floods (OECD, 2014a). Single shocks, such as recent earthquakes in New Zealand and Chile, have caused damages in excess of 20% of gross domestic product (GDP), with local economies and populations disproportionately affected. Disasters also take a tragic toll on development and poverty reduction by forcing an estimated 26 million people into poverty every year (Hallegatte et al., 2017).