Disaster Risk Financing Consultant, Pakistan (SHA-Secondment, Asian Development Bank)

Background

Pakistan is one of the most vulnerable countries to natural hazards and has faced some major disasters in the recent past, including the 2005 earthquake, 2010, 2014 floods, 2015 glacial lake outburst flood and October 2016 earthquake. These disasters incur not only a very high cost of recovery/rehabilitation and reconstruction, but also have significant financial implications for governments, businesses, communities and households through direct damages to infrastructure and property as well as disruptions to economic activities and livelihoods. At the national level, the aforementioned catastrophes have highlighted the inadequate financing and risk management capacity of governments, businesses and institutions.

Although progress has been made by the federal and provincial governments in Pakistan with the establishment of financing mechanisms for dealing with disaster losses by allocating resources in their budgets, however there is no technical basis to determine such allocations, reflecting limited ground work done on Disaster Risk Financing. Moreover, the governments have limited additional ex ante DRF instruments at their disposal, including risk transfer solutions such as insurance.

A further potential barrier to the development of risk transfer markets is the lack of an insurance culture. Households and businesses in countries with less developed insurance markets like Pakistan are not usually aware of the potential benefits of insurance and normally hold limited trust in insurance companies. The insurance companies, in turn, may have solvency constraints while both insurance providers and clients may be insufficiently aware of the disaster risks faced. The Pakistani insurance market is under-developed and the overall insurance penetration (life and non-life premium as percentage of GDP) has remained less than 1% over the last few years which is one of the lowest levels of penetration in the region. In 2015, the total insurance penetration (life and non-life) was approximately 0.82 percent in Pakistan; lower than Sri Lanka (1.15 percent) and India (3.44 percent).

There is very limited understanding of catastrophe related risk insurance and re-insurance in the domestic insurance market, mainly owing to the limited availability of disaster risk data, creating challenges in setting appropriate insurance premium rates. Large industrial and commercial firms can seek insurance coverage against catastrophe risks from their Pakistani insurers. The lack of maturity in the DRF market and limited competition further restrict charging of actual premium rates. Catastrophe insurance for properties (houses and cars) is still in its infancy due to the fact that insurers consider such risks uninsurable. This in turns translates into lower awareness among the consumers or potential policyholders and creates a situation where most people expect the government to provide assistance in the event of a disaster or assume they will have to handle their loss by themselves. Even when government provides post disaster compensation, it typically remains on an ad hoc basis, creating uncertainty about the likely provision of government support and contributing to low resilience to disasters.

The NDRMF

Realizing the aforementioned concerns particularly the increasing rate of occurrence hazardous events, the National Disaster Risk Management Fund (NDRMF) has been established in the Country. The NDRMF is a government-owned non-bank financial intermediary with a corporate structure. NDRMP aims to provide grants for those sub projects which contribute to enhance Pakistan’s resilience to climatic and other natural hazards and strengthen the government’s ability to quickly respond to disasters triggered by natural hazards. The NDRMF is presumed to be an apex financing institution that will maintain the highest level of integrity and transparency in managing and guiding investments that reduce exposure and vulnerabilities associated with climatic change and natural hazards. The fund will strive to strengthen the technical knowledge base in disaster and climate change risks and impacts to develop markets for transfer of residual risks of natural hazards that cannot be mitigated.

The NDRMF will provide financial and technical support to the government. The government will pass on ADB loan funds to the NDRMF as a grant, for on-granting by NDRMF to eligible implementing partners. It is important to note that NDRMF will finance only up to 70% of the total cost of eligible subprojects. Only those subprojects would be eligible which enhance the Country’s resilience to extreme weather events and other natural hazards.

One of the priority thematic areas of the NDRMF is to develop a disaster risk financing strategy which can support governments’ efforts to manage these significant financial implications.

National Disaster Risk Financing Strategy

Disaster risk modeling work will be conducted for Pakistan as a part of the program of work supported by the NDRMF. The risk modeling work will provide quantitative information on the expected levels of loss for hazard events of varying types, intensities and return periods, including probable maximum loss curves and disaster risk maps. The results of the disaster risk modelling work will provide the basis for a separate activities of DRF including formulation of a national DRF strategy for Pakistan, development of two instruments and deployment of one as a pilot.

The particular focus of disaster risk financing strategy is to enhance the fiscal management of disaster risk, easing sudden pressures on public resources for disaster response purposes, smoothing the costs of response over time, and facilitating timely early recovery and reconstruction efforts. Under the strategy, appropriate DRF tools will be identified for each layer of loss, based on combined multi-hazard loss curves and taking into account the scale of funding required for each layer of loss, the speed with which disbursement of funding is required and the relative cost-effectiveness of alternative instruments for specific layers of loss.

The national DRF strategy will also take into account the balance of DRF responsibilities between different levels of government and between government, the private sector civil society, including business, farmers and households. It will determine an appropriate set of instruments that can provide adequate DRF arrangements in order to manage sovereign and sub-sovereign contingent liabilities, based on a combination of risk retention and risk transfer instruments. The strategy will help in identification of measures which effectively support the growth of non-sovereign solutions, such as middle-class property insurance, small and medium-sized enterprise insurance, crop and livestock insurance, micro insurance, and portfolio insurance, reducing the implicit contingent liability faced by government. It will also identify priority sovereign and non-sovereign ex ante DRF instruments– that is, instruments put in place before a disaster occurs – for development and piloting under the NDRMF.

Majority of capacity development programs on the financial management of disaster risk will be supported by NDRF, including the development and deployment of DRF solutions on pilot basis. These DRF instruments will be designed through hiring of specialized firms/institutions as well as specialist consultants and engagement of key public sector stakeholders.

Scope of Work and Expected Tasks

The Disaster Risk Finance (Consultant) will coordinate overall DRF activities under the NDRMF, including the supervision of disaster risk financing strategy preparation, development of two region specific instruments and deployment of one instrument through firms/specialists hired by the Fund. The consultant would be responsible for overall maintaining progress, record of meeting minutes, consultations and coordination of DRF activities on behalf of fund.

The specific tasks of the position are illustrated below (but not limited to the following):

1. Consultant will be responsible to develop a roadmap for execution of Disaster Risk Financing component.
2. Develop/refine DRF related Terms of Reference/scope of work to be undertaken by NDRMF, in close consultation with key government agencies and other players with interest in the subject.
3. Support the technical selection of DRF relevant consulting firms and individual consultants contracted under the NDRMF.
4. Guide and supervise the disaster risk financing consultants in the development of the DRF strategy and coordinate reviews of draft outputs by relevant stakeholders
5. Suggest/consult pilot instruments, insurance policy rates, terms and conditions, including those for parametric products; Develop underwriting criteria with hired firm/consultants
6. Disseminate outputs of the DRF work and promote its use for risk transfer and risk management purposes, as relevant.
7. Provide comments and advice to government on DRF-related policies, plans, legislation and other relevant documents, as requested.
8. Identify key issues in the legal reform process that need to be addressed to implement the proposed DRF pilot.
9. Develop guidelines on post-disaster budget execution to enhance the rapid allocation, disbursement and use of DRF resources and their cost-efficient use, beginning by documenting existing practice and procedures and experience in recent events and drawing on good practice from other countries.
10. Coordinate closely with government agencies, development partners, insurance companies and other relevant stakeholders concerning disaster risk financing activities and maintain up-to-date information on their activities and programs.
11. Lead the design, organization and delivery of DRF knowledge events, in accordance with client needs.
12. Review progress reports on DRF activities and contribute to related monitoring and evaluation activities as requested.
13. Undertake other tasks as assigned by NDRMF, ADB and SDC relevant to fund assignment

Outputs

1. Inception Report covering:
   • Road map and timeline for preparation of DRF strategy, development of instruments and deployment of one instrument on pilot basis.
   • Revised ToRs for disaster risk financing consultants/firms, as relevant
   • Initial scoping exercise capturing DRF activities completed, underway and planned by other stakeholders.
   • Preliminary schedule of knowledge events (workshops) and related actions to support the establishment of an insurance culture in the country.
2. Mid Term Progress Report covering:
   • Review of DRF activities and implementation status progress under the NDRMF and contribution to wider efforts to strengthen the financial management of disaster risk in Pakistan.
   • Legal framework of DRF in Pakistan, gap assessment and recommendations for improvement
   • Revised road map, if required.
   • Draft guidelines on post-disaster budget execution.
3. Final Report covering:
   • Detailed review of DRF progress and achievements, including related challenges and opportunities for further advancement.
   • Recommendations, including road map, for the design and deployment of further DRF instruments and any additional DRF needs in support of the enhanced financial management of disaster risk in Pakistan.
   • Final guidelines on post-disaster budget execution.

Qualifications

Education Requirements and Experience

1. Master's degree in Insurance, Risk Management, Actuarial Sciences, Economics Management, ACII /FCII, Finance, Accounting, Statistics, Spatial Econometrics or other relevant fields of study with specific experience of risk insurance and re-insurance.
2. The competent candidate should have a general experience of about 12-15 years.
3. The candidate should have to demonstrate proven relevant experience of about 8-10 years relevant to the assignment especially experience in the insurance, re-insurance sector, preferably in a large re-insurance companies e.g. Munich Re Swiss, Re or any other.
4. Must have track record of disaster related fiscal risk and the design of disaster risk financing solutions.
5. Past experience of implementing similar projects in Asian countries and good understanding of disaster risk financing in Pakistan, would be an advantage.

Note: citizenship of Switzerland or the European Union is required.

Duty station: Islamabad, Pakistan

Start and duration: As soon as possible for 1 year (extendable)

Contract Type: SHA-contract