WASHINGTON, DC October 5, 2012 - The Executive Directors of the World Bank approved a proposal to expand the authorizations in place to intermediate disaster risk management products. The new authorizations allow IBRD and IDA to offer derivatives to manage the financial risks of geological and meteorological events, in addition to weather events, and to provide these products to client countries, their sub-national entities, and regional and international organizations. This complements existing disaster risk management tools offered by the Bank such as the Cat DDO, the Crisis Response Window, and the Immediate Response Mechanism and is part of the broader agenda of mainstreaming disaster risk management.
When intermediating on behalf of clients, the Bank stands between the client and the private sector, engaging in back-to-back transactions with both parties to pass on the terms of the risk protection from the market counterparty to the client, while providing protection to the client against the credit risk of the private sector counterparty. Clients benefit by leveraging private sector risk capital to manage the financial impact of natural disasters and by making use of the World Bank’s technical expertise and standing in the financial markets.