National DRF Strategy

Pakistan has tremendous exposure to natural hazards, ranging from earthquakes and landslides to floods and droughts. The country has been experiencing disasters linked to natural hazards of various intensities, in different geographical zones with varying impacts. This signifies that localized disaster events linked to natural hazards as well as catastrophes of larger scale have been hitting the country on a frequent basis.

The earthquake 2005 (resulting in economic losses worth $5.2 billion) and Flood 2010 (resulting in $10 billion worth economic losses) are considered the most devastating disasters in Pakistan. On the other hand, localized disasters linked to natural hazards (posing extensive risks) take place throughout the country at regular intervals. Although the impact of such a localized event is small on its own when compared to an event of large scale (e.g. Earthquake 2005 and Flood 2010). The cumulative impact, however, over a period of time remains considerably high and can’t be ignored.

Whereas the institutions are trying their best to reduce the existing risk through DRR activities, it is evident that preventing and mitigating the entire risk set remains unfeasible and some of the risks will prevail anyway. This remaining risk needs either to be retained in a more informed way or transferred to reduce the financial vulnerability of the Government, using appropriate risk financing instruments (ranging from contingent financing, risk insurance, risk pooling, and cat bonds, etc.

The DRF Unit is mandated to develop a National DRF Strategy, which is to steer the country in the right direction in the context of Disaster Risk Financing. The NatCat model will provide a firm basis to develop a national DRF strategy for Pakistan and pilot prospective DRF solutions in the country. The national DRF strategy would identify appropriate tools for each layer of risk, based on multi-hazard loss curves and taking into account the scale of funding required for each layer of risk, the speed with which disbursement of funding is required, and the relative cost-effectiveness of alternative instruments for specific layers of loss.