The magnitude of losses from disasters is forcing countries to consider risk financing measures within fiscal policy. These mostly relate to: setting up national reserve funds; creating favourable and fast-disbursing credit arrangements with international financial institutions, contingent on the occurrence of disasters; and purchasing sovereign insurance to provide financial cover for emergency expenditure and losses to infrastructure and public buildings.

Such risk financing strategies are widely perceived to reduce risk only if they are integrated into a wider national risk management strategy that tackles risks systematically. The ultimate goal of such strategies is to create a less risky distribution of people and assets within a country or, where people and assets are exposed, to make sure that adequate measures are in place to protect them from hazards.

This paper aims to support decision-makers to better understand the role of national economic policy, fiscal policy and development planning in disaster risk management, and encourage more concerted action to tackle exposure to disasters.

The paper contains practical examples from which others can learn, including cases from Central America, Central Asia, Mexico, Nepal and the Caribbean, involving tools and methods related to risk assessment, risk financing options, sector-level mainstreaming and legislation. The paper emphasises climate-related disasters, although the findings apply more broadly.