Public consultation: Draft OECD Recommendation on Building Financial Resilience to Disaster Risks

The OECD has initiated a public consultation seeking comments on a draft OECD Recommendation on Building Financial Resilience to Disaster Risks. This Recommendation aims to provide guidance on the financial management of disaster risks that is relevant for a wide range of countries facing different levels of disaster risk and capacities to manage those risks. It would update and replace the 2017 OECD Recommendation on Disaster Risk Financing Strategies. The public consultation will be open until 19 May 2023. Comments received will be carefully considered in the development of the final draft revised Recommendation that will be submitted for approval by the OECD Insurance and Private Pensions Committee (IPPC) and transmission to the OECD Council for adoption. Comments should be sent to Leigh Wolfrom ([email protected]) at the OECD Secretariat.

Deadline: 19 May 2023

About the Recommendation

Background

The effective financial management of disaster risks is a key public policy challenge for governments around the world, particularly those faced with significant exposures to such risks and/or limited capacity to manage the resulting impacts. Disasters generate a broad range of direct and indirect impacts on all parts of society, including loss of life and livelihoods and damage and disruption to public and private property and infrastructure as well as fiscal impacts arising from recovery and reconstruction expenditures and decreased tax revenues.

The draft Recommendation on Building Financial Resilience to Disaster Risks aims to provide guidance on the financial management of disaster risks. It includes a set of high-level recommendations for addressing the financial impacts of disasters, comprising four building blocks:

• Ensuring comprehensive risk assessment by supporting the availability of data and technology necessary for the quantification of disaster risks and the identification of potential financial vulnerabilities - serving as the basis for making effective decisions on risk management and underwriting insurance coverage for these perils;
• Supporting the effective management of financial impacts, by building up a financial system and regulatory frameworks necessary to support the ability and willingness of individuals, businesses and sub-national governments to protect themselves against the financial impacts of disaster risks, with measures to support risk awareness, risk reduction and the availability of affordable insurance and other financial protection tools;
• Effectively managing the impacts of disasters on public finances by evaluating the potential financial impacts and risks to public finances and developing an approach to ensure adequate funding to respond to financial demands; and
• Establishing strategies for managing the financial impacts of disasters, based on an integrated, multi-hazard approach and cooperation across levels of government and with relevant stakeholders, supported by the necessary resources and expertise.

The draft revised Recommendation aims to provide guidance that is relevant for a wide range of countries facing different levels of disaster risk and capacities to manage those risks and to contribute to efforts to build financial resilience at the G7, G20, APEC and other international fora.

This draft revised Recommendation would update (and replace) the 2017 Recommendation on Disaster Risk Financing Strategies [OECD/LEGAL/0436].

Process to revise the Recommendation

In 2022, the OECD Insurance and Private Pensions Committee undertook a review of the implementation of the OECD Recommendation on Disaster Risk Financing Strategies. The 2022 Report to the OECD Council on the Implementation of the Recommendation concluded that the Recommendation remains relevant for efforts to build financial resilience against disaster risks. It was noted that the economic and social impacts of natural hazards and other types of large-scale disasters have continued to increase. For example, a changing climate has been linked to an increase in the frequency and/or severity of many types of climate-related hazards, including floods and cyclones. At the same time, increasing reliance on digital technologies has led to greater exposure to cyber attacks and a number of incidents have demonstrated the potential for widespread or even systemic consequences due to common exposures to key information technology infrastructure such as cloud services and operating systems. The COVID-19 pandemic illustrated the potential economic and social vulnerabilities that can result from a large-scale infectious disease outbreak exacerbated by a significant gap in insurance market coverage that led to a need for large-scale fiscal support for impacted individuals and businesses.

This recent experience highlights the continued need for governments to ensure that they are prepared to address the financial consequences of all types of disaster risks. It also highlights the importance of ensuring that the Recommendation’s guidance properly captures the different measures that may be necessary to address the financial impacts of disasters such as cyber attacks and infectious disease outbreaks. In this context, a need to better reflect these types of risks in the content of the Recommendation was identified. In addition, in an effort to streamline the set of OECD legal instruments related to the financial management of terrorism risk, relevant elements of the Recommendation on the Establishment of a Check-List of Criteria to define Terrorism for the Purpose of Compensation [OECD/LEGAL/0331] have been incorporated into this draft revision.

Invitation to comment

The IPPC is now inviting interested stakeholders to comment on a consultation draft of the Recommendation. The public consultation is open to all interested stakeholders from all countries, including businesses, industry groups, civil society organisations, trade unions, as well as academia, interested citizens, international organisations and governmental experts (including from non-Adherent countries). The Recommendation and therefore the current revision process is likely to be of particular interest to relevant policy makers and public authorities, insurance industry representatives and consumer representatives.

How your input will be used

Comments may be submitted in English or French. You will not receive an individual response to your input unless the OECD Secretariat needs to clarify your feedback. Responses received will be analysed by the OECD Secretariat and shared with the IPPC. They will be taken into consideration in developing the final version of the draft Recommendation on Building Financial Resilience to Disaster Risks. The final draft revised Recommendation will be submitted to the IPPC for approval and transmission to the OECD Council for adoption. A summary of responses will be published on the website in an aggregated and anonymised format. Please indicate clearly if you do not wish your response to be included in the published summary.

Your data protection rights

Any personal data you provide as part of this consultation, including your name and responses will be protected consistent with the OECD Data Protection Rules.. Under the Rules, you have rights to access and rectify your personal data, as well as to object to its processing and request erasure in certain circumstances. To exercise these rights in connection with the consultation please contact [email protected].

If you have further queries or complaints related to the processing of your personal data, please contact the OECD’s Data Protection Officer. If you need further assistance in resolving claims related to personal data protection you can contact the OECD’s Data Protection Commissioner.

What are OECD Recommendations and how are they used?

OECD Recommendations are adopted by the OECD’s governing body, the Council, and result from the substantive work carried out in the Organisation’s committees and their subsidiary bodies. Recommendations are not legally binding but they represent a political commitment to the principles they contain and entail an expectation that Adherents will do their best to implement them.

For more information, please consult the online Compendium of OECD Legal Instruments.