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Disaster Risk Insurance For Vulnerable Communities In Pakistan

Project Reference: TAAS-0032

The Government of Pakistan responds to natural disasters (increasing floods, earthquakes, cyclones and droughts) on case to case basis, relying on domestic budgets, including diversion ofresources from other projects, and on extensive financing from international donors. While ex-postdisaster funding from donors and multilateral financial institutions can be an important part ofgovernment’s catastrophe risk management strategy, over-reliance on this approach has majorlimitations in terms of efficiency, effectiveness, and sufficiency. By ensuring that sufficient liquidityexists very soon after a disaster, modern funding approaches such as micro insurance of thevulnerable communities are being considered to help to speed recovery and ensure that scarcegovernment funds are well used.

The National Disaster Management Authority (NDMA) has charted a plan which has political backing to take it forward.The plan is to design the Disaster Risk Insurance such that it provides low-income households easily accessible and affordable insurance. This could potentially be at any of the 5 levels: i) Covering demise of the bread-earner, ii) Food security, iii) Shelter, iv) Livestock, and v) Crop.

The National Disaster Management Authority (NDMA), Government of Pakistan has requested CDKN to support its cause to develop a risk transfer mechanism to protect the lower income population group against extreme events that are expected to increase in frequency due to climate change impacts. They have requested for two components:

1.Design of the fund and preparation of any legal documentation required, and

2.Formulate an Insurance Strategy for Disaster-prone Vulnerable Communities.

CDKN is approaching the request in two phases. As part of the completed Phase 1, five options of a potential fund design have been prepared for the NDMA to choose from. Under the ongoing phase 2, CDKN is supporting the NDMA in designing an insurance strategy by undertaking a 6 months Demand Study in 5 districts of Pakistan. The detailed insurance strategy will help the NDMA in moving towards consensus on the Fund designs proposed under Phase 1.


Read CDKN Project Manager Kashmala Kakakhel’s blog from the workshop in Islamabad which launched this project.

Publication May 2014 Developing a disaster risk insurance framework for vulnerable communities in Pakistan: Pakistan Disaster Risk Profile

CDKN Funding: £577,665.00

Project Manager: Kashmala Kakakhel

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