Ten Pacific Island countries which are members of the World Bank have a population of about 3.4 million people, scattered across an area equivalent to 15 percent of the globe’s surface, with a development trajectory that will be shaped by their economic geography.
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REGION: EAST ASIA AND THE PACIFICCOUNTRY: PACIFIC ISLANDSFOCUS AREA: FINANCIAL PROTECTIONResults & AchievementsPCRAFI’s Pacific Catastrophe Risk Insurance Pilot is the first parametric c... Show More +atastrophe risk transfer transaction in the Pacific region. Successes and best practices from the PCRAFI pilot have informed discussions for developing a similar risk pooling mechanism in the Indian Ocean Islands. More than $1.2 million was awarded in early 2014 to Tonga, the first country to benefit from an immediate payment,following Cyclone Ian. Participating Pacific Island Countries have obtained an estimated 50% reduction in premiums under the risk pooling mechanism when compared to a country-specific approach.The Pacific Island region is highly vulnerable to natural disasters and climate-related hazards, costing some countries an average of up to 6.6% of gross domestic product (GDP) every year. In response to requests from 15 countries, the World Bank, the Global Facility for Disaster Reduction and Recovery (GFDRR), and other partners formed the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) in 2007 to help mitigate disaster and climate change risk.Under this initiative, the first regional Catastrophe Risk Insurance Pilot (the Pilot Program) was formed and is significantly helping post-disaster response in the Marshall Islands, Samoa, the Solomon Islands, Vanuatu, Cook Islands and Tonga. In 2014, Tonga became the first country to receive a recovery payment following the devastation from Cyclone Ian in January.The 22 Pacific Island Countries (PICs) are among the top 30 nations most vulnerable to natural disasters. Subject to cyclones and tropical storms and prone to volcanic eruptions, earthquakes, and tsunamis, the PICs suffer, on average, combined disaster damages of more than $280 million every year. When a disaster strikes, governments in these countries often struggle to secure liquidity for swift post-disaster emergency response, constrained by their small population, limited borrowing capacity, and access to international markets, as well as the small size of local economies. The pilot program is one component of the Pacific Disaster Risk Financing and Insurance (DRFI) program, which is designed to increase the financial resilience of the PICs against natural disasters as part of the broader PCRAFI umbrella.ApproachThe pilot program is a risk pooling mechanism that allows participating countries to purchase catastrophe coverage as a group at significantly lower cost than the cost of independently purchasing insurance. It was designed: As a solution to short-term cash flow problems that small developing economies face following major disasters that disrupt the provision of government services. With the World Bank acting as an intermediary between the PICs and a group of reinsurance companies. To be the first scheme in the Pacific to trigger payments based on specific physical parameters that are determined beforehand (wind speed, ground movement, etc.).Lessons LearnedInsurance is only one component of comprehensive financial protection. In February 2013, a magnitude 8.0 earthquake and subsequent tsunami hit the Solomon and Santa Cruz Islands without resulting in a payment transfer, as the level of physical damage caused by the disaster was relatively low, as confirmed by the rapid impact assessment undertaken through PCRAFI. This demonstrated the need to better communicate the benefits as well as limitations of the pilot program—for instance, that it covers only a portion of the losses when they disrupt the provision of government services.Partnering programs increase efficiency and effectiveness. This pilot program and the Pacific DRFI program benefit from PCRAFI’s other undertakings, such as work on catastrophe risk information and disaster rapid impact assessments. Financed by the European Union (EU) through the African Caribbean Pacific (ACP) – EU Natural Disaster Risk Reduction Program, an initiative of the ACP Group managed by GFDRR, these efforts are helping refine the models that ultimately benefit applications like the pilot program, enhancing their credibility and attractiveness to the private sector, which is becoming increasingly critical to ensuring resilience in the PICs.Next StepsThe Pacific DRFI Program is seeking additional funding from donors to enable greater participation of low-income countries through the provision of premium subsidies and technical assistance. The continuation of the pilot for at least two more years would stimulate discussion among governments on establishing sustainable sources of finance. Additionally, the establishment of a dedicated entity is under consideration. Show Less -
Moving ForwardThe government’ s response to the recent disaster of tropical cyclone Ian, an order of magnitude larger than the tsunami, is testament to increased capacity in tackling critical re... Show More +construction and recovery . Increased mapping capacity was used to quickly develop robust and high-quality damage maps from post-disaster aerial surveillance to support reconstruction and recovery planning. The building designs used in the project will be replicated and housing reconstruction planning is well advanced, with specific emphasis given to address crucial land tenure issues in a timely manner and with highest political BeneficiariesFe’ao Vakata is from Niuatoputapu. Member of Parliament for the Niuas, he came over as part of one of the first relief teams, bringing clothes and other urgent supplies to the affected communities. He describes what it was like at the time:“From wharf to shore you could see damage and there was no one around. It was like a ghost-town. There was no house that wasn’t affected. All the houses on the right-hand side were gone.”“The community was devastated. You talked to them at the time and everyone cried, even the men. They said it’s not just the wave but the whole sea that came to us. The week after it happened, people refused to come down from the mountain. They stayed in the bush, too scared that another disaster might strike.“The project is about much more than a number,” says Fe’ao. “It is about the joy and happiness of the people.”Uini Limoni is one of those whose family has benefitted from the new homes. “The families are safer now, the children are safe. How can we not be thankful for that?” Show Less -
Bank Group ContributionThe Government of Tonga used both IDA and Government of Australia financing through the Pacific Region Infrastructure Facility (PRIF) to address identified constraints in the To... Show More +nga transport sector. IDA support totaled US$5.44 million, with a further US$ 10.3 million from the Government of Australia. The funding was used to advance ongoing transport sector reforms and initiatives so that the sector can better respond to both current and future national needs safely, securely and sustainably. World Bank and Government of Australia funds were then used to upgrade actual transport infrastructure for land transportation, maritime and shipping, and civil aviation.PartnersAfter the project commenced with IDA funding, it was restructured in 2010 with US$ 10.3 million in funding from the Government of Australia through the Pacific Region Infrastructure Fund. This funding allowed the project to transition from a heavy policy project to one focusing on concrete investments in the transport sector, particularly road safety, road maintenance, and maritime safety. Moving ForwardThe creation of the Ministry of Infrastructure and the establishment of the road maintenance fund, along with major improvements to policy and sector operations are the legacy of the project. These will allow Tonga to continue to develop and efficiently operate its transport sector, improving transport safety. Once infrastructure has been upgraded to a maintainable condition, the need for major donor funding for civil works will not be required.Beneficiaries“Every time we have heavy rains I always pack my family’s belongings and seek higher ground because our house always got flooded. But ever since our main road was fixed we hardly got flooded” - Losaline Latu of Houma Village, near the capital Tongatapu. Show Less -
ChallengeHigh call prices put basic telecommunications services out of reach for most Samoans. This lack of access increased the cost of doing business and added to economic isolation within the count... Show More +ry. Other constraints included:Poor phone coverage and access to networks: At the time the project became effective in 2003, fixed-line penetration was just 6.5 per 100 inhabitants (compared to an average of 12 for countries of a comparable wealth level), while mobile phone penetration was just 1.7 percent.Inadequate postal service: Collection and delivery of post by SamoaTel (then the operator of the postal service) was limited, and below Universal Postal Union standards. Samoa lacked home and business delivery.Ineffective sector regulation: SamoaTel’s self-regulation of the industry restricted sector development and interconnection agreements were limited. This situation affected the mobile phone provider’s capacity to deploy a network capable of reaching across the nation.SolutionLike many Pacific Island countries, Samoa faces challenges from geographic and economic remoteness, including unusually high transaction costs for governments and businesses. Reforming the telecommunications and postal sectors was crucial in helping Samoa overcome these limitations, and has made a big impact on people's lives.The Samoa Telecommunications and Postal Reform Project played a critical role in making this happen by:Helping the government introduce a more competitive telecommunications sector that would reduce costs and build usage, including in remote rural areas.Supporting vital reforms to the debt-ridden SamoaTel to improve management operations, including the separation of telecommunications and postal business units.Samoans wanting to use phones, the internet or postal services for business or social purposes stood to benefit directly from a reduction in costs, and an improvement in services and reliability.ResultsAround the world, increased competition in the telecommunications sector has helped expand networks and reduce usage costs. In Samoa, more mobile phone operating licenses resulted in lower call costs, and a more reliable and better service. This development led to a significant increase in phone usage, with 165,500 people gaining access to mobile phones between 2002 and 2010. The growth of mobile phone subscribers can be attributed to a network that expanded to rural areas previously not connected, and to the decline in call costs.A second digital phone license was achieved in 2006.Total customers (fixed and mobile) climbed from 12,500 in 2002 to 152,800 by 2008 and 168,000 by 2010.The Internet subscription target was met in 2010, when the number of subscribers increased from 3,000 in 2002 to an estimated 12,000.The 2010 target for an increase in the number of telecommunications customers in rural areas was 7,000. The actual number reported of customers in rural areas that year was an estimated 57,943.SamoaPost is now self-sustaining and saw revenues increase from about WST 1 million in 2003 to WST 2.5 million in 2010.The number of sub-post offices jumped from 30 in 2002 to 41 in 2010 (37 in Upolu, 4 in Savai’i). Show Less -
Bank Group ContributionThe overall cost of the five-year project is estimated at US$7.2 million, which is being met through a US$3.2 million IDA grant, a US$2.0 million grant from the World Bank-manag... Show More +ed State and Peace-Building Fund, and US$2.0 million from the World Bank-administered Pacific Region Infrastructure Facility (supported by theAustralian Agency for International Development –AusAID-- and the New Zealand Government). An estimated US$5.8 million will go toward the Rapid Employment Scheme, US$800,000 for pre-employment training, and US$600,000 for project management.PartnersIn addition to the national counterpart agencies (the Ministry of Infrastructure and Development and the Honiara City Council) that are responsible for implementation, the project works closely with and relies on the parallel support of AusAID, and the Asian Development Bank(primarily in the transport sector), and the New Zealand Government. Show Less -
OverviewThe Pacific Islands Countries (PICs), with a combined population of almost 10 million people, are highly exposed to natural disasters. In 2007, the World Bank established the Pacific Catastrop... Show More +he Risk Assessment and Financing Initiative (PCRAFI) to develop disaster risk assessments tools and practical technical and financial applications to reduce and mitigate the countries' vulnerability to natural disasters. This initiative will contribute to improved post-disaster analysis and future disaster risk reduction planning for example, by reducing fiscal shocks through catastrophe financing, such as budget reserves, contingency facilities, or catastrophe insurance; or by establishing new building codes and rapid post-disaster assessments. ChallengeThe Pacific is one of the most natural disaster prone regions on earth. PICs are vulnerable to natural hazards that include floods, droughts, tropical cyclones, earthquakes, volcanic eruptions, and tsunamis. Any one of these hazards can result in disasters that affect the countries’ entire economic, human, and physical environment and severely affect their long-term development agenda. Some of the countries are facing losses from a single event that would exceed their annual gross domestic product (GDP). The average annual direct losses caused by natural disasters in the South Pacific region are estimated at US$284 million.Since 1950, natural disasters have affected approximately 9.2 million people in the Pacific region, causing 9,811 reported deaths. This has cost the PICs around US$3.2 billion (in nominal terms) in associated damage. In September 2009 a tsunami hit Samoa, American Samoa and Tonga. This tsunami left 150 people dead and some 5,300 people–2.5 percent of Samoa’s population–homeless. The tsunami also caused extensive damage to Samoa’s infrastructure. The cost of restoring infrastructure, maintaining access to basic social services, providing social safety nets to the affected population, and investing in disaster risk reduction, is expected to be around US$120 million, that is, 22 percent of GDP during the next three to four years.The consequences of natural disasters are especially dire for the poor who tend to live in higher-risk areas, and typically have fewer options in terms of protection or risk mitigation. Population pressure, compounded by the effects of climate change, is likely to increase this vulnerability. Recognizing these trends, there is now widespread acceptance of the need to mainstream disaster risk and climate change in development planning and financing. ApproachAt the request of the PICs, the Secretariat of the Pacific Community (SPC)/Applied Geoscience and Technology Division (SOPAC), the World Bank, and the Asian Development Bank initiated work in 2007 aimed at quantifying the financial risk that countries face because of their exposure to natural disasters. These risk assessments, carried out using state-of-the-art risk modeling techniques, allowed the development of specific technical and financial solutions (or applications) to reduce or mitigate the effect of these risks.The first step in developing catastrophe risk profiles for the PICs involved compiling a comprehensive historical catalogue of all recorded events in the region, including tropical cyclones, earthquakes and tsunamis. These historical records were then used to build an even more comprehensive database of simulated catastrophic events using additional technical information about the known behavior of tropical cyclones, earthquakes and tsunamis, such as expected wind speeds and the location of fault lines. This information is referred to as thehazard database.The second step was to identify the geo-location, the characteristics and value of all assets that could be damaged by the catastrophic events. This information is referred to as the exposure database.The third step was to estimate the damage caused to assets because of a catastrophic event.The information from the first three steps was subsequently used to simulate many thousands of events and calculate risk profiles for each country. This information was also used to generate hazard and risk maps to identify the location of high-risk areas.Once the risk profiles were calculated, they can be used in many different practical applications that can reduce or redistribute the risk over time. These applications are discussed in more detail below. ResultsThe key result of this initiative is the Pacific Catastrophe Risk Information System (PacRIS)and the different practical applications that have been developed using the vast information the system contains. Another important result of the project is that PacRIS is managed and owned by SOPAC for the benefit of its member countries, thus achieving economies of scale and providing catastrophe risk data management services to it members. The following applications that have been developed so far will significantly help to reduce the risks these countries' 10 million people face every year.State-of-the-art catastrophe risk models. For each of the 15 PICs, state-of-the-art catastrophe risk models have been developed to assess the economic and fiscal impact of natural disasters, including earthquakes, tsunamis and tropical cyclones. In particular, the models estimate the economic losses caused by natural disasters with different return periods (for example, frequency of occurrence).Country disaster risk profiles. Risk profiles have been developed for all 15 PICs which integrate data collected and produced through the risk modeling process and include maps showing the geographic distribution of hazards, assets at risk, and potential losses that can be used to prioritize disaster risk management interventions. The profiles also include analysis of the distribution of the potential cost of natural disasters by magnitude over time for each country, as measured by the expected return period for losses of a specified amount. This analysis will be used to develop financing options to cover the cost of natural disaster risks.Disaster and Climate Risk Financing and Insurance. This application aims to assist the PICs in improving their macroeconomic planning against natural disasters, and the design and implementation of a national disaster risk financing strategy, as part of their national disaster risk management and climate change adaptation agenda.Pacific Catastrophe Risk Information System (PacRIS)The PacRIS is managed by the Secretariat of the Pacific Community (SPC)/Applied Geoscience and Technology Division (SOPAC). PacRIS itself consists of three large databases. Containing about a terabyte of data, PacRIS has information for 14 Pacific Island Countries and Timor-Leste. The system houses the most comprehensive historical catalogue of earthquakes and tropical cyclones, a database of geo-referenced fixed assets, and probabilistic analyses and mapping of risk carried out to date. PacRIS contains digitized maps describing residential buildings, major infrastructure such as roads, bridges and power stations, vegetation cover, crop maps, soil and topography, and bathymetry (sea depth). This information in PacRIS is being used for a number of practical applications.Database of Historical Tropical Cyclones and Earthquakes (Hazard Database). The database is the result of an exhaustive effort of collecting, merging, and processing data from multiple sources regarding historical Pacific earthquakes and tropical cyclones, and the monetary losses and impact on populations caused by these events. The historical earthquake catalogue currently includes about 115,000 events of magnitude 5 or greater that occurred in the region between 1768 and 2009, while the tropical cyclone catalogue includes 2,422 events from 1948 to 2008.Database of Accumulated Losses (Consequence Database). Most of these events did not have major consequences for the human population, infrastructure and residential buildings, or crops, but some did. A “consequence” database was assembled that contains approximately 450 events from 1831 to 2009 that affected at least one of the 15 PICs. This database, which is the most complete in existence for the Pacific region, shows that, on average, these countries have collectively experienced losses in the order of US$1 billion per decade, rising to US$4 billion in both the 1980s and the 1990s.Database of Assets Exposed to Disasters (Exposure Database). This database contains components for buildings and infrastructure, agriculture, and population. For the building and infrastructure dataset, more than 450,000 footprints (outlines) of structures were digitized (captured in computer) from high-resolution satellite images. These buildings represent about 30 percent of the estimated total number of buildings in PICs, and cover all urban buildings in the Pacific. Of these, about 80,000 were physically checked, photographed and classified. An additional 3 million, primarily rural buildings, were geolocated and classified using remote sensing techniques.In addition to the infrastructure and residential buildings, the database also includes information on major cash crops, ground cover, topological maps and population. To date, this database is the most comprehensive exposure dataset for this part of the world. The estimated total replacement cost of all the assets in the 15 PICs is about US$113 billion, an amount that includes US$94 billion in buildings, US$15 billion in infrastructure assets, and US$4 billion in major crops.BeneficiariesThe immediate beneficiaries of the PCRAFI are the members of the Pacific disaster risk management and climate change adaptation community, including the National Disaster Risk Management Offices, Ministries of Environment and other national agencies responsible for urban planning, agriculture, health, water, and energy; local nongovernmental organizations (NGOs) involved in community-based disaster risk management; regional technical centers such as the Secretariat of the Pacific Community SPC/SOPAC; multilateral development banks; bilateral donor agencies; and the private insurance and reinsurance industry. The ultimate beneficiaries are of course the people of the PICs who in the end, will benefit from more informed decisions on development planning and financing. Bank ContributionThe Bank is providing knowledge accumulated from its work in disaster risk management initiatives in other regions, particularly Latin America and the Caribbean. The Bank is also providing technical leadership in the areas of risk modeling, finance, public expenditure analysis and geographic information systems development. PartnersThe PCRAFI is a joint initiative between the Secretariat of the Pacific Community (SPC)/Applied Geoscience and Technology Division (SOPAC), the World Bank, and the Asian Development Bank. To provide guidance on the various disaster risk management applications to be developed and implemented using the PCRAFI tools and to develop national ownership of the PCRAFI products, tools, and system, the establishment of a working group under the Pacific Disaster Risk Management (DRM) Partnership Network is under consideration.This technical assistance initiative has had a total budget of US$3.3 million. Financial support of US$1.3 million has been made available by the Government of Japan under the World Bank-administered Japan Policy and Human Resources Development (PHRD) Technical Assistance (TA) program. Through the Asian Development Bank, the Japanese Government has provided an additional US$1 million to cover the costs of the field verification of data. The Global Facility for Disaster Reduction and Recovery (GFDRR) has contributed an additional US$1 million.For the next phase of the project the ACP-EU Natural Disaster Risk Reduction Program funded by the European Commission provided funding of US$1,4 million to strengthen the Pacific risk information system and its use by Pacific island countries . Toward the FuturePacRIS provides a powerful tool for managing catastrophe risk in the Pacific, through the development of applications to solve specific on-the-ground problems. Some of these applications are already under development and other potential uses are expected to emerge.Urban and development planning. Planners can use the information to evaluate changes to land use and zoning based on natural hazard risk, to develop investment plans to retrofit buildings for earthquakes, or to raise floor levels to avoid flooding due to tropical cyclones. The risk assessment can also be used to carry out cost benefit analyses of proposed disaster prevention or mitigation investments.Building codes. The earthquake and tropical cyclone hazard models provide critical information for building codes in terms of country-specific seismic and wind loads that buildings should be designed for to ensure adequate shelter for the population.Rapid disaster impact estimation. The aim of this application would be to use baseline information on assets already collected to model the expected losses from a catastrophic event immediately after a disaster. Rapid assessments will facilitate faster funds flows in post-disaster situations. Show Less -